Know the 2017 IRS contribution limits
The Internal Revenue Service (IRS) sets limits on the amount you can contribute to workplace plans—401(k), 403(b), and 457 plans—each year.
Contribution limits for 2017
For 2017, the contribution limit is $18,000, the same as it was in 2016. The catch-up contribution limit (if you're over 50 years old) also has stayed the same, so you can add an additional $6,000, for a total of $24,000.
Consider saving 10%
One rule of thumb is to contribute at least 10% of your income to your plan each year. Some experts suggest saving even more.
You can start by saving 6% of your pay and increase it by 2% to 3% each year until you reach 10% or more. If possible, always contribute enough to get the full company match.
When you make pretax contributions to your plan, you lower your taxable income and reduce your tax bill. But your take-home pay isn’t reduced by as much as you're saving. For example, say you’re in the 25% tax bracket and make a $200 contribution to your plan each paycheck. You’d only reduce your take-home pay by $150.
Save more if you’re 50 or over
You'll want to live well in retirement. Catch-up contributions let you contribute more money to your workplace retirement plan after age 50. You're eligible on January 1 of the year you turn 50, no matter how late in the year your birthday falls. See how this extra contribution can make a big difference:
- Scott is 50 and earns $72,000 per year. He had already reached the annual contribution limit for his workplace plan.
- Now that he’s 50, he can defer $230 more from each paycheck.
- At a modest 6% rate of return, Scott will add $148,035 to his savings by the time he’s 65—a significant boost.1
Can you contribute more?
See how much a slight increase in savings could affect your paycheck and retirement savings. Contribution planner .