401K Contribution Limits
Time flies when you are having fun and retirement may sneak up on you before you have the good sense to start planning for it. 401k contributions can allow you to start funneling money into it in order to catch up with what you will need. Unfortunately the government and employers put limits on how much you can contribute.
Because social security is taking such a hit, the government has increased the contribution limit in order to alleviate the stress that baby boomers will be putting on social security in the near future. Because of the poor economy, baby boomers are delaying retirement and therefore contribute even more to their retirement plans. This contribution limit increase will hopefully motivate people to put away more money now and rely less on social security in the future, assuming that it is still available in the next thirty years. Analysts calculate that the social security trust fund will be bankrupt by 2041.
For 2008, the contribution limit is $15, 500 which is up from the $15, 000 limit for 2006. Employers can also limit the amount of money that you contribute since they often match your contribution or a percentage of your salary. If they match the first five percent of your salary that you contribute, then try to contribute the full five percent. Keep in mind that company contribution allowances can be lower than the government allowance.
Even if $15, 500 is more than you can contribute, pushing your budget to receive the full match amount from your employer makes the most sense. You are simply turning down free money if you don't. Only nine percent of contributors hit the maximum allowable $15, 500 limit. Keep in mind that your combined contributions to multiple 401k plans can not exceed that limit. It is not $15, 500 per 401k. Online contribution calculators can help determine how much you can afford to contribute and how that contribution will benefit you in retirement funds.
Those over 50 who worry that their retirement is not secure may make catch-up contributions, usually $5, 000 more than the limit, for an annual total of $20, 500 for 2007 and 2008.
Contributing the minimum amount to a 401k is better than no contribution to a retirement plan at all. Too many people are depending on Social Security to provide their financial security. Thinking in the long term can be difficult, especially when retirement seems so far away, but the economy is fluctuating and causing more and more people to put aside their retirement dreams. Don't let poor planning and small contributions keep you from sailing into the sunset with a secure retirement plan in an insecure world.
Pamella Neely writes about how to start a bakery, how to start a home bakery and what you need to do before you open a bakery.
Article Source: ArticlesBase.com
