A lot of people ask how I should invest my 401k contributions? There is one simple answer that question; it depends on the person. Many people see the average 401k balance for the 40 year old, but this is not how it works. Ask the question yourself how much should I invest my 401k in regards to your individual financial situation including debt, Roth IRA, and if your employer matches the funds. The 2016 Roth 401k contribution limits are $5,500 with extra $1,000 for employees aged 50 and above. Please note that the 2016 Roth 401k contribution limits to set for after-tax dollars.
Max 401k contribution 2016
The 2016 401k contribution limits vary with the financial circumstances of the taxpayer. The 401k contribution limits stand at $18,000. These 2016 401k contribution limits have been set after making adjustments against cost of living. The average 401k balance for 40 year old individuals varies with their industry. If they are working for an industry with slow growth, they will have a lesser amount of contributions. However, if you are above 50 without much saved, you can always make 401k catch up contributions. The 401k catch-up contributions will help overcome the deficit of the past years.
How does a 401k work?
The 401k contribution limits help you determine your eligibility. A 401k contribution for a qualified retirement plan lets employees working in an organization save and invest for their retirement days. The flexibility of 401k catch up contributions lets you add more towards your retirement after 50. You can check the 2016 Roth 401k contribution limits to see the amounts you want to put aside. Always keep your family’s financial needs in perspective when planning for 401k.
How should I invest in my 401k?
The 401K investments are the trickiest of all questions. You have to be careful when putting away your entire life’s savings into some venture. For example, some people are more risk averse; they want to invest somewhere safe. On the other hand, some people like to go big by taking more risks. A person who wants to avoid risks many choose to invest in mutual funds. Stock investment is not easy with more risks involved. But if you have carefully read the company’s financial statement, you will do good. Make sure to keep yourself away from speculators and invest for the long run. A good company earns for itself and adds value for company’s shareholders.