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You Can Put Up to $66,000 into Your Employer-Sponsored 401k. Here’s How. Saving for retirement is crucial, and one of the most popular ways to do so is through employer-sponsored 401k plans. These plans offer many advantages, including tax benefits and the opportunity to grow your nest egg over time. However, many employees are unaware of the maximum contributions they can make to their 401k. In 2022, the Internal Revenue Service (IRS) has set the contribution limits for 401k plans at $20,500 for individuals under 50 years old. But did you know that those aged 50 and over can make additional catch-up contributions? This means that if you are 50 or older, you can contribute an extra $6,500 to your 401k on top of the regular contribution limit, bringing it to $27,000. However, the contribution limits don't end there. If you have a high salary and want to save even more for retirement, you may be eligible to contribute to an after-tax 401k account, also known as a Roth 401k. The after-tax contributions you make to a Roth 401k are not tax-deductible, but the earnings from these contributions grow tax-free. The IRS allows a combined contribution limit for both the traditional and Roth 401k accounts, which is capped at $58,000 in 2022 for individuals under 50. But here's where it gets even more interesting. If your employer allows it, you can make additional after-tax contributions to your 401k above the $58,000 limit. These contributions are known as "mega backdoor" contributions. The IRS allows a total combined contribution limit, including all employee and employer contributions, of $61,000 for individuals under 50. However, if you are over 50 years old and making catch-up contributions, this limit increases to $66,000. Mega backdoor contributions can be a game-changer for those looking to turbocharge their retirement savings. By maxing out their contributions, individuals can take advantage of compounding returns and potentially achieve a more comfortable retirement. To make mega backdoor contributions, you need to check if your employer allows after-tax 401k contributions and in-service withdrawals. In-service withdrawals allow you to move the after-tax contributions to a Roth IRA while still employed. If your employer permits these options, you can contribute above the regular limits and then transfer the additional contributions into a Roth IRA, where they can grow tax-free. Keep in mind that mega backdoor contributions require careful planning and attention to tax regulations. Speaking with a financial advisor or tax professional is highly recommended to ensure you're following the correct procedures and taking full advantage of the opportunities available to you. In conclusion, taking advantage of the full contribution limits of your employer-sponsored 401k can significantly boost your retirement savings. By making catch-up contributions, utilizing after-tax 401k contributions (Roth 401k) and potential mega backdoor contributions, you can contribute up to $66,000 annually, allowing for substantial growth in your retirement accounts. Remember to consult professionals to optimize your strategy and secure a prosperous retirement. https://inflationprotection.org/discover-how-you-can-maximize-your-employer-sponsored-401k-contribution-to-up-to-66000/?feed_id=134037&_unique_id=64fac8ca34f6a #Inflation #Retirement #GoldIRA #Wealth #Investing #401kmatch #401kmatchexplained #compoundinterest #howtomakemoney #moneyguyshow #personalfinance #BackdoorRothIRA #401kmatch #401kmatchexplained #compoundinterest #howtomakemoney #moneyguyshow #personalfinance
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