When most of us think about how much we can contribute to our 401k, we only think about how much we can contribute as an employee. That limit is $18,000 for 2017. I really hope everyone maxes out this year and every year for the rest of their working careers.
Yes, some of us get paltry company 401k matches up to a certain percent of income or up to a particular absolute dollar limit. But for the most part, we’re left fighting for our own retirement well-being since the pension system is going the way of the dinosaur.
The reality is an employer can contribute a heck of a lot more than 3% of your salary, or whatever their company match may be. They just need to have the profits and the desire to do so!
After about the fifth year at the firm I retired from, I started receiving “profit sharing” on top of my $5,000 401k company match. I always maxed out my 401k while I was there from 2001 – 2012. During good times, such profit sharing bumped up my overall company 401k match to $25,000 during some years. Ah, those were the good old days.
For those of you who are employed, I suggest familiarizing yourself with your company’s pre-tax retirement savings programs ASAP. You might be leaving free money on the table. For those of you looking to join a new firm, inquire about their retirement savings program. It could be worth a fortune over time.