Investing in a 401(k) plan is one of the most effective options an investor has to plan for retirement. Tax-deferred growth and relatively high contribution limits enable individuals to amass a more substantial nest egg over their working years. Employer matching contributions, where applicable, represent an additional boost to retirement savings. The convenience of automated contributions and diversified investment options enhance the flexibility and ease of managing one’s retirement portfolio. For these reasons and more, the 401(k) plan is a powerful tool for building a secure and prosperous retirement future, and knowing the amount one can contribute per year to the account is important for maximizing retirement savings.
401(k) Contribution Basics
A 401(k) account is an employer-sponsored savings plan that allows employees to invest for retirement while saving money on taxes. The plan allows employees to select a specific amount of money, called a contribution, which they can deduct from their paycheck each pay period. The Internal Revenue Service (IRS) determines the maximum amount of these contributions, which aims to govern the tax advantages associated with these contributions and the overall 401(k) plan structure to promote responsible retirement planning.
Support authors and subscribe to content
This is premium stuff. Subscribe to read the entire article.