How 401K Maximum Catch-up Contribution Limits Benefit Savers?

Suffering from anxiety due to lack savings plan? Take a chill-pill and apply for 401K retirement plan right now. If you are 50 years of age or over, don’t worry! With 401K maximum catch up contribution limits, save more and enjoy a secure retirement.

Worried about loss of time for planning your retirement? 401K retirement plan provides enough room to compensate your loss by introducing catch-up contribution limits. Being one of the most preferred retirement saving plan, it facilities savers with potential scope to plan wisely and save for the golden times of retirement. Apart from the yearly revised contribution limits, catch-up limits are solely meant for those savers who are 50 years old or above.

Update-

Since 2001, 401K contribution limits are revised yearly and generally the increment is about $1,000. In 2008, the upper contribution limit was $15,500. Every year the IRS enhances this amount taking inflation into account. This year it’s $16,500 p.a. As per the rule, next year (2013) it will go up by $1,000. It simply means US retirement planner can now contribute as much as $17,500 p.a. to their savings account.

Coming down to 401K maximum catch-up limits, the figure is $5,500. It will remain the same in the coming year too.

The benefit 50 age or over participant would enjoy is bigger amount of contribution. Altogether, they can now save $23,000 p.a. For retirement planning, this much of flexibility is matchless.

Benefits-

At times, it’s found that savers lost the prime time for retirement savings. Several reasons can be there behind this. However, loss is loss after all. To mitigate this loss, these maximum catch-up contribution limits play a pivotal role. Savers 50 years of age or above get a golden chance to save on the top of the maximum contribution allowed for participants below 50 years of age.

Moreover, pre-tax catch-up contribution attracts many savers to plan for a 401K membership. Participants close to their retirements enjoys this facility and invest happily.

Catch-up contribution was introduced in 2008. This retirement savings plan used to allow $5000 p.a. as catch ups. Now in 2012, the amount is $5,500.  Surely enough, in 2013, the amount will be same and it may be revised again in 2014.

Why a 401K account is popular?

Catch-up contribution is good. Besides, this retirement plan brings in matching employers contribution and tax-deferral benefits along with loans facility.

Employer’s Matching Contribution-

Say, an employee is contributing $10,000 in his savings account. His employer can contribute a percentage of this amount to his savings. If it’s 50%, then employee can save $15,000 p.a. More savings mean happier retirement.

401k Tax-deferrals-

While saving with this account, your amount is never taxed unless, you withdraw it. At the time after retirement, people generally withdraw this and being in lower tax-brackets, they save much of their savings.

401K loans-

There is a hush-hush about this loan. However, surveys show that many savers are applying for this type of loans and repaying back. Unlike any other type of loans, it just withdraws your own savings. However, it’s taxed every time, you withdraw loans.

To conclude-

This retirement savings plan is on the rise. Especially for those savers who are already 50 years of age or over, find it more convenient to save more for their retirement. 401K maximum contribution limits are definitely playing a crucial role in it.