The IRS announced some exciting news today regarding retirement accounts. Starting in January 2015, the maximum contribution limits for your 401K or 403B tax-deferred retirement accounts will be increased to $18,000. If you want to max out your 401K and you get paid bimonthly, you just need to divide $18,000 by 24 for a deposit of $750 per pay period.
If you’re over age 50, you can now contribute a maximum of $24,000 per year.
While not every working individual can afford to save the maximum 401K contribution amount, it’s certainly a goal to reach for. Start by saving up to the company match, and then slowly increase your contributions 1% at a time, every pay period. It took me two and a half years before I could start maxing out my 401K.
You can read the IRS announcement here. There’s some good discussion about the new 401K contribution limits on the Bogleheads forum here.
It’s a shame that the IRS did not increase the contribution limits for traditional and Roth IRAs. Not every worker has access to a company 401K, and the current limits for IRA contribution of $5,500 ($6,000 if over 50) a year is ridiculously low. Hopefully we will get an increased contribution limit for our IRAs in the future.
If you are getting paid to work, you should be thinking about your retirement. Otherwise, you will either work until the day you die or hope to live on social security and government assistance.