With the new year comes new opportunities to contribute to retirement comfort. The rules for 401 (k)’s are changing.
KTRH Moneyman Pat Shinn, a financial consultant with Heritage Asset Advisors, says the business retirement savings plans are inherently confusing.
When you select how much you would like your pre-tax contribution to be, you’ll be asked for a percentage. But the increase in the maximum contribution isn’t really about the percentage. “The maximum is a dollar amount. It’s easy to see where the confusion comes from because when you fill out the paperwork they want you to put a percentage down,” he advises.
The increase is $1,000, jumping from a maximum of $19,500 a year to $20,500 a year in most cases. If you are over age 50 you can also contribute up to $6,500, same as last year.
Trying to do the math to figure what percentage to increase your annual contribution could be beyond your basic math skills, recognizing that most people are nowhere near their ceiling, but Shinn has a 1% solution. “The 1% solution is where you move your contribution up 1% per year. Eventually you’re going to look up and you’ll be contributing the maximum amount and you’ll not even be missing the money.”
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