Every year, investors face the choice of whether to max out their allowable 401(k) contributions. If you don't, you lose that contribution room. If you do, you have less money for paying down debt and current spending. Here are some considerations to ponder when deciding whether to max out your 401(k) contributions.
Should You Max Out Your 401(k)?
The Pros and Cons of This Oft-Touted Investment Strategy
A company 401(k) is one of the most popular retirement investment tools available. The plan allows a maximum investment of $16,500 per year (for 2010) and $22,000 for those over 50 years old. As with all other retirement investment platforms, there are both reasons to max out your 401(k) each year and some cautions about doing so.
Maxing Out Your 401(k) -- Pros:
1. Potential company match -- Many corporate 401(k) plans have a provision that provides for company matching of contributions, usually up to a certain percentage of income. This is "free money" and an overall benefit to the investor. It is worthwhile to at least contribute enough to get the maximum matching benefit, even if you do not max out contributions.
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