The Maximum 401K Contribution in 2014
The IRS 401K maximum contribution has finally been officially announced for 2014, after a long delay due to the government (including IRS) shutdown.
The 2014 401K maximum contribution is $17,500 – the same as last year. That ends a two-year streak of increases in the limit from the IRS.
Lets hope a repeat of 2009-2011 doesn’t ensue. The 2009, 2010, and 2011 maximum 401K contributions had all been stuck at $16,500 prior to the 2012 maximum 401K contribution limit jumping from $16,500 to $17,000. The 2013 maximum 401K contribution then jumped to $17,500.
I have to admit that I am a not that surprised, considering that increases are based of off inflation data from the BLS, and the CPI only increased 1.5% over the past year.
The maximum contribution is applicable to your personal contributions to traditional 401K’s and Roth 401K’s (or a combination of the two, if you have both). It is separate from the employer maximum 401K contribution.
403B and 457B plans will have the same contribution limit in 2014.
2014 401K Catch-Up Contribution
The maximum 401K catch-up contribution per year for those over 50 years old, however, will stay the same at $5,500 over the standard contribution limit in 2014. No increase. Same goes for 403B’s and 457’s.
401K Maximum Contributions Historically
The maximum contribution level has increased in all but seven years going back to it’s start in 1987 (over 75% of the time). Three of the seven years without an increase were 2009 through 2011 (Great Recession)
It’s also worth nothing that the maximum 401K contribution amount has never been cut from one year to the next.
Max Out your 401K in 2014
If you would like to max out your 401K in 2014, take $17,500 and divide it by your total salary from your employer. For example, if you make $70,000 per year (includes bonuses), then take $17,500 and divide by $70,000 to calculate the percentage of your pay you would need to contribute to max out your 401K.
In the above example, it would be 0.25, or 25%. Then, work with your HR department or your 401K administrator to update your 401K contribution percentage.
Going Beyond your 401K
Not everyone will be able to contribute the maximum, no doubt. If you can, however, it is one of the best things you can do for your financial future, particular when a possible employer 401K match is at stake.
If you do max and want to contribute more, you can create a Traditional or Roth IRA. I moved both of mine to TradeKing, who has zero maintenance or inactivity fees if you have a minimum $2,500 balance or make one trade per year. Trades are only $4.95.
If you have left an employer and have old 401K’s sitting around, you may want to consider a 401K rollover to an IRA or your current 401K. You’ll probably be saving money on fees in an IRA versus your 401K.
2014 Maximum 401K Contribution Discussion:
- Are you disappointed that the 2014 401K maximum contribution was not increased, or is it a non-issue for you?
- Do you plan on maxing out your 401K this year or in 2014?
- Have you ever maxed out your 401K?
- Are you investing in a Traditional 401K, Roth 401K, or both?