401K Q’s: Employer Match, Milestones & 50+ Contributors

In the logs of Blueprint for Financial Prosperity, there are plenty of questions about 401(k)’s that certainly need some solid answers. In this post I’ll list a few of them, give you my thoughts, and hopefully we can solve some problems!

Does your employer’s 401(k) contribution/match count towards that $15k maximum?
No it doesn’t, the 401(k) maximum contribution of $15,500 in 2007 does not include your employer contributions. That limit is only what you put into the account.

How much should I have when I’m X years old?
This is always a difficult question to answer because there is not “right” answer, just what the averages seem to be. According to an article published on CNN Money in July of 2007, the averages are:

• Baby Boomers rose 7 percent to $38,000
• Gen Xers rose 10 percent to $15,000
• Gen Yers rose 21 percent to $2,100

What should you do with a retirement fund during a Recession?
This really depends. If you are really strapped for cash and need it to make ends meet, I can understand tapping into the retirement fund to avoid taking on extreme expensive credit card debt or being tossed out on the street. If you’re thinking about taking a pro-active approach, I would avoid tapping into it unless you absolutely need to. As for investing, if you’re horizon is over five years out, I probably wouldn’t change your plans. The typical recession lasts 18 months, if you’re within that window then consider putting your allocations into safer investments (which you probably should be doing anyway, even without the fear of a recession).

Can someone over 51 contribute to a 401(k)?
Of course! Anyone with income can contribute to a 401(k) and should contribute. In fact, the IRS lets someone over the age of 50 contribute an additional $5,000 to their 401(k) to “catch up” in their contributions. So, the total limit in 2007 that one can contribute to a 401(k) if they’re over 50 is $20,500.