The 401(ok) plan is the preferred sort of employer-sponsored defined-contribution retirement plan. In keeping with the Survey of Earnings and Program Participation (SIPP), 60 million people or 33.0% of the U.S workforce participated in 401(ok) plans in 2008.
By saving within the 401(ok) plan, you get a direct tax break, as a result of contributions come out of your paycheck earlier than taxes are withheld. You additionally get tax-deferred progress – which means you don’t pay taxes every year on capital features, dividends, and different distributions.
Annually the IRS can yearly modify contribution limits. For 2018, the pre-tax contribution restrict to the 401(ok) plan is rising to $18,500 whereas the general 401(ok) contribution restrict will increase barely. Listed below are the small print of 401(ok) contribution limits.
401(ok) Contribution Limits
| Tax Yr 2018 | Tax Yr 2017 | |
| Elective Deferral Restrict | $18,500 | $18,000 |
| General Contribution Restrict | $55,000 | $54,000 |
| Catch-Up Contribution | $6,000 | $6,000 |
Roth and Conventional IRA contribution limits
| Tax Yr 2018 | Tax Yr 2017 | |
| Age 49 and beneath | As much as $5,500 (should have employment compensation) | As much as $5,500 (should have employment compensation) |
| Age 50 and older | Extra $1,000 | Extra $1,000 |
Abstract
For the 2018 tax 12 months, you may select to contribute as much as $18,500 into the pre-tax 401(ok) account, with a further $6,000 catch-up contribution allowed if you’re 50 and older.
The general 401(ok) contribution restrict is $55,000. This total restrict contains workers’ pre-tax, after-tax or Roth contributions to the 401(ok) Plan. For individuals 50 or older with a further $6,000 catch-up allowance, the general restrict is $61,000.
For Roth IRA and Conventional IRA, the contribution restrict is $5,500 with a further $1,000 catch-up contribution allowed if you’re 50 and older.