Each year the 401K maximum contribution changes. Usually an increase with an increment of $1,000 is expected per year for the annual 401K contribution limit. For the 2010 401K maximum contribution, it was $16,500 for employees aged 50 and below. And for those aged 50 and above, an additional catch-up amount of $5,500 was scheduled, making a total of $22,000 for these folks. For self-employed individuals, the 2010 401K maximum contribution was $49,000 for those who are 49 years old and below, and $54,500 for 50 years old and above.
People who have been contributing to their 401K accounts can attest to the numerous benefits that can get. Aside from having a nest egg for the future, a contributor may also invest his/her 401K savings into money-making investments such as stocks, bonds and other profitable markets.
For employees who were able to meet the required 2010 401K maximum contribution, they were also able to save on taxes. Since 401K is deducted prior to the taxation of the annual income, it is possible for any employee to save more on taxes if his/her contributions are continuous.
Starting out in 2010 can be a difficult year for some newly employed individuals. But the decision to save and pay the 2010 401K maximum contribution will benefit any individual in the long run. Even newbie business owners may have struggled with the current state of the economy. But by ensuring that their 401K has been set for the first year and continuous payment will be done yearly, will greatly benefit them as they reach retirement.
Some people who have 401K savings would often recommend that higher contributions are the sure way to benefit. This may be true, but consider the in-between years and the financial situations that may occur during those times. One of the biggest mistakes is to withdraw money or take a loan from one’s 401K account. It is only advisable to do that if you are truly in need of cash and without any other possible resources to finance that need.