Common advice is to be sure and max out your 401K contribution. Are they referring to the maximum percentage that your employer matches your contribution. Or are they referring to the maximum contribution set by a IRS limit, currently $15K?
2006-08-04 04:22:01 · 9 answers · asked by A. Sorola 2 in Business & Finance ➔ Personal Finance
They are referring to the amount for which your company matches. If you put in the maximum your company will match its like doubling your money. Of course maximizing the total amount on your 401k to the 15k amount can also help as well. My brother did this right out of college until very recently. He's 31 now and doesn't have to add very much to be able to retire early barring some unforeseen event.
2006-08-04 04:38:25 · answer #1 · answered by erik c 3 · 0⤊ 0⤋
Here's my thought. If your employer offers a matching 401k plan, then the bare minimum you should contribute is the maximum the employer will match. You will not find a better investment for your retirement savings plan. If you can afford to contribute more then I would recommend to do so as the tax defferred saving capabilties of the plan far outweigh any other investment options.
Establishing and maintaining your retirement plans should begin as early in the work life as possible. The more you contribute today, the sooner you can stop working in the future. Those who do not save for the future are destined to work forever... something I certainly don't want to do!
Good luck and I hope this helps!
2006-08-04 04:32:26 · answer #2 · answered by wrkey 5 · 0⤊ 0⤋
They are talking about the maximum contribution allowed. The reason for this is that it reduces your tax burdon while increasing the amount of money you are putting towards retirement.
Another option that you have is to contribute the maximum percentaget that your emploer matches and then take anything above and beyond that and contribute it to an IRA. You might want to do this in the case where your employers investment options aren't performing and you could do better outside.
2006-08-04 04:31:53 · answer #3 · answered by BAM 7 · 0⤊ 0⤋
The MINIMUM I would invest is up to the maximum company match.
Maxing out a 401(k) refers to making the maximum contributions in a tax year, currently (as you said) $15k
2006-08-04 16:07:41 · answer #4 · answered by homeschoolmom 5 · 0⤊ 0⤋
It's certainly advisable to contribute to your 401k (or 403b) up to the amount matched by your employer - that's free, risk-free money.
After that, if you qualify for a Roth IRA (your income can't be too high or it's phased out), stick $5,000 in one of those. Growth in the Roth IRA is tax-FREE if withdrawn for retirement after age 59 1/2 (versus the money withdrawn from the 401k which is taxed). You're putting after-tax money into the Roth, but what you are doing is "diversifying" your risk of being in an equal or higher tax bracket at retirement.
If you think that's not possible, consider that tax rates are at historical lows and we're under a huge and growing deficit.
2006-08-04 11:48:59 · answer #5 · answered by SmartGuyinTexas 1 · 0⤊ 0⤋
They probably mean the employer match. It is well worth it to you to make the most out of your employer's match since it is like free money. I think that the IRS limit is really high and unrealistic for most people to contribute into their 401K.
2006-08-04 04:28:23 · answer #6 · answered by cricket 4 · 0⤊ 0⤋
Referring to max limit that you can contribute and defer your taxes. Are you absolutely sure the max limit is 15K?
2006-08-04 04:28:04 · answer #7 · answered by voandginger 4 · 0⤊ 0⤋
Match what ever you employer matches.
2006-08-04 07:19:54 · answer #8 · answered by reallyno 3 · 0⤊ 0⤋
it means 15k
2006-08-04 04:35:17 · answer #9 · answered by jean 4 · 0⤊ 0⤋