What Are the Rules For 2010 401k Contribution Limits?

If you are looking to save for retirement, there are many options out there that are available to you. All things considered, most people want to be able to maintain their current lifestyle, if not a better one, when they retire. In order for this to happen though money has to be put back in a way that it will continue to grow. A 401k has tax exemptions that go along with it; but, there are certain stipulations that apply to 401k contribution limits as well.

A contribution is made when money is placed into an account from a paycheck or through other means. A traditional investment plan, such as a 401k, can be obtained through an employer, if offered by the company, or if you are self employed. The choice can also be made to have the funds withdrawn automatically from your pay every pay period in a specified amount. In some instances, employers will match the contributed amount.

For the upcoming tax year 2010, the 2010 401k contribution limits are $16, 500 for individuals under 50. For those over 50 the total is $22, 000. This limit applies to 401k and Roth 401k plans.

Taking too much money out of a 401k can increase your tax bracket. If you are at least 59 ? you can withdrawal money from this account just remember the chance you are taking.

Contributions made to 401k plans are tax free. Considering other investment plans, this is a major benefit of the 401k. The only time that taxes are withheld is if you make a withdrawal.

What is the benefit for you in investing in a 401k? In the long run, that the money that you put in the 401k is not taxable when it is invested. Your money has an opportunity to gain interest over time. When you withdrawal the money, it will be taxed.

Saving money over time can work to your advantage. With 401k plans, the money you invest earns interest. Due to the way these plans are setup, you earn interest on the interest, or compound interest. As stated previously, the contributions are not taxable.

When investing in a 401lk, the individual, in most cases, decides where the money is invested at. Bonds, stocks and mutual funds are the variety available. Since 401k plans offer a steady but slow growth, choosing a safe investment is the popular way to go.

There are different companies out there that can help you with your investment strategy. These companies normally offer advice and options for saving for retirement. In the end though, the choice is yours.

As mentioned before there is a 401k plan called a Roth 401k. With this plan, you can make additional after tax contributions and the gains from it can be withdrawn tax free.

The government has setup these tax breaks in an effort to help the consumers out. Do your best to contribute the maximum allowable amount to these plans. It is in your best interest to do so. Not to do it, is counterproductive for you.

For the latest 401k limit info, such as the latest 2010 401k contribution limits you can find a breakdown at the site. Similarly, you will find data on the lesser talked about Roth 401k, which comes with a number of advantages.

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