What Are The 401(k) Contribution Limits 2017?

Advertisement

401(k) plan still remains one of the most used traditional type of retirement savings plan used by the employers. But there are several other different types of Retirement Plans too. The Internal Revenue Service is responsible for adjusting the contribution limit annually. However, the contribution limit or elective deferral is kept at $18,000 for three years in a row now. Let’s discuss the 401(k) contribution limits 2017 and the difference between 401k and 403b.

What Are The 401(k) Contribution Limits 2017?

401k contribution limits 2017

For 2017, all the 401(k) participants can elect to have up to $18,000 of their compensation deposited into their account. However, an added $6,000 catch-up contribution option is available for the participants of age 50 or older.

Even though the contribution limits remain unchanged for 2017, the overall 401(k) contribution limits have increased. The overall 401(k) contribution limit this year is $54,000. It includes the elective deferrals accompanied by employer matching contributions, non-elective employee contributions and certain allocations for forfeitures. The catch-up allowance  of $6,000 for people older than 50 years is applicable to the overall limit as well. This means the overall limit is stretched to $60,000 for them. Obviously, there can be no contribution exceeding the total compensation. By the way do you know What Are The Best Mutual Funds For IRA?

The contribution limit includes Roth 401(k) Contributions too!

The contribution limit is the same for Roth 401(k). This means a person can contribute up to $18,000 per year to either the common 401(k) plan or a Roth 401(k) plan. However, the total amount cannot exceed $18,000. But do you know What Are The Best Places To Open A Roth IRA?

Fortunately, any kind of employer matching contributions to the 401(k) plans are excluded from the employee contribution limits. Furthermore, the employer matching contribution does not depend on this limit.

What is the difference between 401k and 403b?

difference between 401k and 403b

It is important to note the difference between 401(k) and 403(b) plans. The major difference is the type of employers that can offer the plans. The 401(k) plans are only offered by for-profit companies, whereas 403(b) plans are only given to employees of tax-exempt organizations. These organizations include schools, hospitals and certain religious groups.

The two plans are most similar, their names are just to refer to the section of the tax code outlines these plans. The 403(b) plans in the past use to offer limited investment choices than corporate plans, but have recently started to offer a wider variety of investment options. The other difference is that while 401(k)s generally contain vesting schedules scattered over a few years, multiple 403(b) plans vest sooner.

Can I roll a 401k into a 403b?

No company can offer both 401(k) and 403(b) plans to its employees. However, if a person changes employers from a for-profit company to a non-profit, they can take their retirement savings account with them. The Internal Revenue Service allows people to move money from a 401(k) plan to a 403(b) plan in such cases.

How to do it?

A person can move their money from their 401(k) plan to their new 403(b) plan either through a rollover or through a direct transfer. In a “rollover”, they receive the money first and have 60 days to redeposit the money into 403(b) plan. In a direct transfer, the money is automatically moved from 401(k) plan to 403(b) plan.

So, what’s the bottom line?

The best thing a person can do in order to save for retirement is to contribute as much as they can as early as possible. There’s a good chance that in the future, the money will not have the same long-term compounding power as it has right now. There are other means of investments too. Here are The 7 Best Short-Term Investment Plans For You!

You may also like...

Leave a Reply

Your email address will not be published. Required fields are marked *