Maxing Out Your 401(k) Contributions
Get the most out of your retirement plan
Photo by Eyecandy Images/Age fotostock
When you make pre-tax contributions of $17,000 to your 401(k) plan, you can save approximately $6,000 in federal and state income taxes each year.
Q. I was just hired at a new job that has a 401(k) match. What's the most I can contribute to my 401(k)?
A. Maximizing contributions to your 401(k) plan may be the single most important step you can take in saving for your retirement.
For 2013, the Internal Revenue Service has set the maximum pretax contributions to a 401(k) plan at $17,500.
If you're 50 or older before Dec. 31, 2012, you can make the $5,500 catch-up contribution.
Concerning employer matches, there is a current limit of 6 percent of the employee's pretax compensation.
You can also contribute to your 401(k) funds that are not tax-sheltered. Such after-tax contributions also are limited by the IRS. For 2013, your total contribution (pretax plus after-tax) can be no higher than $51,000.
Carole Fleck is a senior editor at the AARP Bulletin.