Can You Still Max Out Your 401(k) 2014 Contribution Limit?

It's almost April already, and your retirement savings are nowhere near the contribution limit. But you might still have time to add funds -- to the right kind of plan.

Mar 27, 2014 at 2:00PM


Let's work together to keep this number as low as possible, shall we?

Editor's Note: A previous version of this article incorrectly stated that all employee-participants in 401(k) plans can still make contributions for the 2013 tax year until April 15, 2014. This option is not available for most 401(k) participants. The author and the Fool regret the error.

The April 15 deadline for filing federal income tax returns is looming large these days. Maybe you're still working on your 1040 forms and cursing under your breath for missing out on retirement account deductions.

Don't panic. Did you know that you might be able to contribute funds to your IRA under the 2013 tax year -- all the way until the April 15 filing deadline? That's true for traditional and Roth IRAs, and even for certain self-employed options like SEP-IRAs, SIMPLE IRAs, and solo 401(k)s so long as you've done the necessary prep work beforehand.

More importantly, though, you should now be thinking about getting to the maximum 401(k) 2014 contribution limit. For most 401(k) participants, the annual limit for 2014 is $17,500, plus an additional $5,500 catch-up contribution if you're aged 50 or older.

Don't scoff at these 401(k) contributions. Every person's situation is different, but almost all of us can make a huge difference to our annual tax bills by contributing to a 401(k). Even if you can't afford to max out your retirement contributions, it's worth considering to see if you can collect matching contributions from your employer and other incentives.


Here's where the magic happens.

401(k) contributions are deducted from your salary before the paycheck is cut, printed, and sent home. For traditional 401(k) contributions, by reducing your top-line income directly, this move creates the same effect as a juicy $17,500 tax deduction.

The process is a little different for IRA contributions, and you'd use a different Form 1040 line to report last-minute extra contributions that weren't simply drawn from your pre-tax earnings. But it's still a direct benefit that reduces your total tax bill.

Roth 401(k)s and IRAs are different again. Here, you contribute to your IRA with regular after-tax dollars. The tax benefit comes at the end, when you get to withdraw funds from the account without paying taxes on the withdrawals. Regular IRA accounts and 401(k) plans have taxable withdrawals at the end of the road.

Contributing to a retirement plan may be the most important financial decision you'll ever make.

An automatic payday contribution doesn't hurt your monthly paycheck that much, but it can still make your retirement much more comfortable. Fellow Fool Anand Chokkavelu recently recounted how the most financially irresponsible man he knows decided -- almost at random -- to take part in his employer's 401(k) plan -- and now he's watching a $50,000 retirement fund grow without lifting a finger to maintain it.

And it's no secret that the stock market generally rises in the long run. You don't even have to beat the market to secure a generous long-term return. Over the last 20 years, the Dow Jones Industrial Average (DJINDICES:^DJI) -- which arguably represents the market -- has more than quadrupled in value. That's despite going through one recession and the dot-com crash.

^DJI Chart

^DJI data by YCharts.

So if you haven't made a 2013 IRA contribution yet, don't delay -- make it today. 401(k) plans are great, what with their employer matching policies and low maintenance. But sometimes the flexibility of an IRA lets you do things that a 401(k) plan won't allow.

Meanwhile, take steps now to take maximum advantage of your 401(k) 2014 contribution limit. The sooner you act, the less you'll have to worry about come tax time next year.

Start your journey to stock market riches today
Maybe your 401(k) account is fully stocked with fresh funds -- but you have no idea how to actually invest it all. It's OK, you're not alone. Millions of Americans have waited on the sidelines since the market meltdown in 2008 and 2009, too scared to invest and put their money at further risk. Yet those who've stayed out of the market have missed out on huge gains and put their financial futures in jeopardy. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.

Anders Bylund has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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