401K Limit: Know The Rules

For American workers looking for ways to set aside for their retirement years, 401K plan is a blessing. This retirement income plan requires enrollees to contribute a percentage from their pay on a monthly basis. For lucky employees, some companies will also offer their share in the plan and this can really benefit members of the plan.

This is a tricky plan so new employees should study all provisions thoroughly to be able to understand them. When you are looking for information on this retirement income plan, you will surely come across 401K limit. Regulations covering the plan are all issued by the IRS. Members of the 401K plan can set on the percentage of their pay that will be put to the plan. Also, the IRS 401K limit members from withdrawing money if they have not reached the retirement age set by the plan. Still, you can withdraw, but there’s a catch: your withdrawals will be subjected to taxes and your savings for the future will be sacrificed.

If you want to see a clearer picture of your contribution, an example will be presented here. Supposing that your salary for one month will be $3500 and you committed 10 percent for the 401K plan, your employer will minus $350. Take note that you should report this number to your employer to avoid encountering errors when your salary arrived. The 401k limit in terms of annual contribution for those who are under fifty years old is $15,500.

Since this plan is not compulsory for all workers, one can choose not to become a member. Choosing not to enjoy the benefits of the plan in the future can be a wrong decision since some employers now opt to offer contribution to their employees’ plan. As employees retire, they can be assured of regular income, thanks to 401K plan, so it’s a must to become a member as early as today.

Come retirement, you will surely enjoy the things that you’ve missed today especially if you have your retirement income intact. Retirees face many challenges and one of the most common involves money. So, preparing as early as today indicates that you want to make sure that you will have a very bright future. In the end, you should be happy when you retire because you will have all the time in the world to enjoy.

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