The IRS outlines maximum contribution amounts for all retirement plans. The law allows these amounts to be indexed, so, each year, the maximum amounts increase slightly based on a Cost of Living index.
View the current limits HERE.
How much Should I Save?
This is a loaded question. The generic response to this question is usually “as much as possible.” Though true, the lack of specificity in that answer does not help! There are many factors that must be considered such as:
To what extent are you relying on Social Security?
Do you have other sources of income, such as rental income, royalties, etc.?
Are you expecting an inheritance that will help you in your retirement?
How much, realistically, can you save today given your current financial obligations?
All of these items can impact a recommended annual savings amount. These variables aside, the Society of Actuaries suggest you save at least 10%-15% of your annual pay towards retirement. If you cannot save that amount and are fortunate enough to participate in an employer-sponsored retirement plan that offers a match, it is strongly encouraged that (at a minimum) you defer enough of your pay to capture 100% of the match. In other words, if your 401(k) plan offers $1 for $1 on 4% of your pay, save at least 4% of your pay! If your employer matches $0.50 per $1.00 on 8% of pay, save at least 8% of your pay, otherwise, you leave “free” match money on the table.
Bottom line is to save what you can, even $50-$100 a paycheck can make a big difference in saving for your retirement. Invest early and make your money work for you!
The information contained herein is not intended as financial, legal or tax advice, and may not be suitable as required by specific circumstances. Please consult your financial planner, attorney and/or tax adviser as needed.