The 401k Contribution Limit in 2014 and Why Does This Matter?
How Much Could You Contribute to a 401k Retirement Plan in 2014?
What were the 401k retirement contribution limits in 2014?
Why do you still need to know this information, given that 2014 is over? How can this information help you save for retirement in the present and future?
Why Should I Track This?
Let's start with the "why." Keeping good financial records, particularly around your income taxes, is a crucial habit. Keep a record of annual retirement contribution limits, plus a record of the percentage of that limit you met. By doing so, you can track your progress.
For example, imagine that in 2013, your contributions equaled 70 percent of the total available limit. In 2014, you contributed 80 percent of the maximum allowable limit. You can see that your savings rate is improving.
By contrast, if you contributed up to 80 percent of the maximum in 2013 but only 70 percent of the maximum in 2014, you can see that your savings rate is weakening. Once you have that information, you can take steps to correct it.
Many people track their savings rate as measured against their salary. If they earn $50,000 and save $5,000, for example, they'll know they're saving 10 percent of their income.
But many people don't necessarily measure their savings rate as measured against their maximum potential savings rate. If the retirement contribution maximum is $18,000 and they've saved $9,000, they're halfway to the maximum. That information gives them a goal to beat next year.
There's a famous adage that says "what gets measured, gets improved." By measuring and tracking your retirement savings, relative to the annual retirement contribution limits, you can start making forward progress in this arena.
What Was the 401k Contribution Limit?
The 401k retirement contribution limit tends to change often. Every year, it changes to keep pace with inflation.
In 2014, however, there were no changes to the 401k contribution limits. Individuals age 49 and under could contribute up to $17,500 in their 401k or 403b retirement plans.
People age 50 and older could contribute an extra $5,500 per year on top of that amount, for a total contribution limit of $23,000.
IRA contribution limits remained unchanged, as well. In 2014, eligible people could contribute $5,500 to a traditional or Roth IRA. If you're 50 or older, you could contribute an extra $1,000, for a total of $6,500.
Between the 401k and IRA contribution limits combined, taxpayers age 49 and under could save up to $23,000 in the year 2014, and taxpayers age 50 and older can save $29,500 for retirement. That's not too bad!
Don't forget: You're always free to save more money—as much as you want—for retirement, if you keep the money in a savings account, CD, TIPS, or a taxable brokerage account.
You won't get the tax benefit on those savings, beyond the limits stated above. But they're still savings. You'll still have a larger portfolio that you can tap during your golden years.