Woohoo! The IRS has announced that, after three “long” years, the 401(k) maximum contribution limit will increase by $500 in 2018. You can read all about the announcement right here.
The catchup contribution of $6,000 per year for folks ages 50 and up will (unfortunately) remain the same in 2018. Why the government wouldn’t allow for additional savings is puzzling at best.
Your 401(k) Maximum Contribution Limit Increases By $500.
And, yes, that’s a big deal!
Many of you might think right now that $500 doesn’t seem like a whole lot. To be honest, in my early 20s, I would have probably thought so too. What really does another $500 mean down the road? A lot, actually!
Over 30 years, a mere $500 can turn into over $55,000 (at an 8% investment return percentage). I hope that seeing these numbers will motivate you to max out your 401(k).
Additional Benefits To Hitting Your Maximum Contribution Limit
#1 … Pensions are basically non-existent at this point. Government jobs are blessed with them. And even my last (non-gov) company offered a small pension. It was short lived however and taken away after a few years.
#2 … Social security is everything but a sure bet. Now, don’t get me wrong. I do believe that we all will still receive social security. But I think it will “only” be a fraction of today’s benefit though.
Between social security and pensions (if you have one), your 401(k) is likely going to need to be a strong pillar on your bridge to retirement. You do not want to only make ends meet when retired. You will want to be able to enjoy life!
#3 … Contributing to your 401(k) lowers your taxable income. Every penny you can deduct from your year-end taxable income will save you big bucks in the long run. Money you can re-invest!
How about it? Will you put away an additional $500 next year? Have you not yet been maxing out your 401(k) this year but are now thinking about doing it next year? Let me know in the comments!
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