The 401k retirement plan contributes to being an amazing retirement account which is exclusively for employees who are living in present. The plan enables the employees to accumulate a specific amount of money during their career. With the aid of this plan, they will be successful in saving a considerable amount of money as pension for the retirement period. The retirement plan contribution limits are inclusive of pre-tax, total contribution limits, catch-up limits, as well as limits which are applicable to employees falling under the high-income bracket. There are specific 401k contributions which do not enable exceeding specific amount at the time of making a contribution. The maximum amount of money a person will be contributing to is dependent on the age.
Contribution limits change every year
In a 401k plan, it is indispensable that the retirement plan contribution limits will be changing every year. The maximum retirement plan contribution limit is dependent on the living costs of the individual in the last year. The announcement of the contribution limit is primarily done during mid-October. The contribution limit of 2011 was similar to the limit of the past two years. The contribution limit happens to be $15,500 on a yearly basis. There are chances that there will be an enhancement in the contribution limit next year since the recalculation of the United States Government is done, owing to the inflation. The rate is enhancing normally at the rate of $500 on a yearly basis.
Contribution limit on a yearly basis
The employee needs to decide if they will provide pre- or post-tax contribution. In case the person is going to apply for after-tax contribution, they should be applying for Roth 401k programs. The person can go for the creation of both accounts if required. However, the contribution limit of both the accounts should not be more than the amount which is mentioned in the contribution limit of 401k.