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2015 IRS Maximum 401K Contribution Limits Increased

The IRS 2015 maximum 401K contribution limits have just been officially announced. Unlike with the 2014 maximum 401k contribution limits. there is an increase in limits once again!

The Maximum 401K Contribution in 2015

The 2015 401K maximum contribution is $18,000 !

In case you’re wondering, here’s how the IRS has increased (or not) the historical maximum contribution limit over the last few years:

  • 2009. $16,500 (increase by $1,000)
  • 2010. $16,500 (no increase)
  • 2011. $16,500 (no increase)
  • 2012. $17,000 (increase by $500)
  • 2013. $17,500 (increase by $500)
  • 2014: $17,500 (no increase)
  • 2015: $18,000 (increase by $500)

This maximum limit applies to your employee contributions to both traditional 401K’s and Roth 401K’s (or a combination of the two, if you have both). It is separate from the maximum employer 401K contribution. If you have self-employment income, it also applies for the “employee” contribution component for Solo 401K’s .

403B and 457B plans will receive the same contribution limit increases in 2015.

2015 401K Catch-Up Contribution

The maximum 401K catch-up contribution per year for those over 50 years old will also increase to $6,000 in 2015 (up $500) over the standard contribution limit in 2014. This is the same for 403B’s and 457’s. The catch-up contribution is IN ADDITION TO the regular contribution limit.

How to Max Out your 401K in 2015

If you would like to max out your 401K contribution in 2015 (highly encouraged if your employer matches up to your maximum), take $18,000 and divide it by your total salary from your employer. For example, if you make $60,000 per year (including bonuses), then take $18,000

and divide by $60,000 to calculate the percentage of your pay you would need to contribute to max out your 401K.

In the above example, the result would be 0.30, or 30%. Next, work with your HR department or your 401K administrator update your 401K contribution percentage.

Historical 401K Maximum Contributions

The maximum contribution limit has increased in all but six years going back to it’s first year in 1987 (over 75% of the time). Three of those six years without an increase happened in the last 5 years (2010, 2011, and 2014).

It’s also worth nothing that the maximum 401K contribution limit amount has never declined.

Moving Beyond your 401K

Not everyone will be able to contribute the maximum, no doubt. If you can, however, it is one of the best things you can do for your financial future, particular when a possible employer 401K match is at stake.

If you do max and want to contribute more, you can also create a Traditional or Roth IRA (the 2015 IRA maximum contribution did not increase – it is still at $5,500). I have IRA’s with Vanguard and TradeKing .

If you have left an employer and have old 401K’s sitting around, you may want to consider a 401K rollover to an IRA or your current 401K. You’ll probably be saving money on fees in an IRA versus your 401K.

401K Maximum Contribution Discussion:

  • Do you plan on maxing out your 401K this year or in 2015?
  • Have you ever maxed out your 401K?
  • Are you investing in a Traditional 401K, Roth 401K, or both?

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