A 401(k) is one of the best retirement savings vehicles around. Money you invest grows tax-deferred, and depending on the type of 401(k) you have access to, you may either get a tax deduction when you contribute or be able to take qualified withdrawals completely tax-free.

While that's a great deal, Congress does restrict the amount of money you can contribute to your 401(k), and the 2014 limits for contributions are pretty close to those of 2013. In fact, the money that may be eligible to contribute as an employee remains exactly the same. Still, it's important to know those limits so you can plan accordingly and maximize the opportunity you have to let your money efficiently compound on your behalf.

Understanding the 401(k) 2014 limits
First, to contribute to a 401(k), you must have income that the IRS considers compensation and have access to a 401(k) through work. That compensation will generally come in the form of a paycheck from your employer, but if you are self-employed and set up your own solo 401(k) plan, your earned income from your business will qualify as well.

You may not contribute more than your compensation. In 2014, however, if you earn enough, then you as an employee may be able to contribute up to $17,500, plus an additional $5,500 if you're age 50 or older. In addition, your employer can contribute on your behalf (which often takes place as a "401(k) match"), but the total contribution between you and your employer cannot exceed $52,000. That $52,000 total is up from $51,000 in 2013. 

In addition, 401(k) plans must conduct nondiscrimination tests every year to make sure the plans are useful for all employees -- not just the highly paid ones. If the plan doesn't pass the test, "highly compensated employees" face additional restrictions on the amount they can contribute. In 2014, if your compensation is $115,000 or higher, you're typically considered a highly compensated employee and are potentially subject to those restrictions. 

Unfortunately, if you may be at risk for that restriction, it can be hard to tell in advance whether the restriction will hit -- and, if it does, where your cutoff will be. That's because the restriction is based on the contribution levels reached by employees covered by the same plan that aren't considered highly compensated. If you do find out after the fact that you've exceeded your contribution limit because of that restriction, don't worry too much. You'll simply get that excess contribution refunded back to you.  

Why you might want to hit the limit
Still, whether you're worried about scraping together the typical $17,500 limit or worried about having contributions returned to you, there's a good reason to try to max out your 401(k) in 2014. All else equal, the more you can sock away and the longer you can continue investing that cash, the stronger your nest egg will be at retirement.

The table below shows the potential growth of $17,500 in annual contributions based on a series of returns and years of continued investing:


10% Annual Returns

8% Annual Returns

6% Annual Returns

4% Annual Returns































Data from author's calculations.

Over the course of a career, if you max out your 401(k) at the 2014 limit of $17,500 and then earn returns in line with historic stock-market averages, you could wind up a millionaire. That's a pretty impressive nest egg from money that can be invested on autopilot, straight from your paycheck.

Chuck Saletta is a Motley Fool contributor. 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.