How to Approach a 401k Max Contribution

A 401k max contribution is not the same as a maximum match. A private corporation can offer to match your contribution up to a certain level of its choosing. As an individual, though, you cannot exceed contributing more than the government's set level to your 401k each year. This is to stop individuals with very high incomes from contributing too much, capitalizing on tax benefits not offered to lower income persons.

Maximum 401k Contributions

The maximum contribution is set on an annual basis. This limit is based on your income. To find the maximum contribution on an annual basis, check the IRS website. Your corporate 401k adviser can also fill you in on this important detail.

Determining Your Contribution Strategy

In essence, failing to contribute the maximum amount allowable annually is leaving money on the table. At least part of your taxable income each year could be minimized, putting money into your retirement account instead of in the government's hands. However, you should contribute a maximum amount only if your other day-to-day and immediate expenses are met. This includes at least three months' salary saved in an account that could be immediately liquidated if you lost your job or suffered another emergency.