401K Contribution Limits and Other Personal Finance Tips to Maximize Your 401K
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Build Wealth 
with the Right 401K Choices-
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Make the most of what you have to make the most of your tomorrow. 
Your 401K contributions are your first investment dollars. Those dollars will grow more faster than any other investment because of the tax advantages that we discuss in detail here. Take advantage of the opportunity to contribute and put the maximum amount that you are allowed in the plan. Your future depends on it.
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You can contribute to a 401K plan that your employer provides through your paycheck. The money will be deducted from your paycheck and put into your 401K account before you pay taxes on it. Sounds scary? Nah, you won’t miss it. You are an adult now and you are saving money for your future. Go for it!
This is an automatic way to save. You get the immediate benefit of paying less taxes for the year. This savings feature is the most popular with people of all ages. Automatic deduction from your paycheck is a comfortable way to save and grow wealth.
Make the maximum 401K contribution that you can. Your employer can tell you when you can start and what your specific 401K contribution limits are.
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Only spouses have been able to avoid a large tax bill when they inherit a 401K. The new tax law now allows non-spouses (children and other family members) opportunities to avoid taxes on inherited 401K money.
Typically the spouse is allowed to take the lump sum distribution from a 401K and roll it over to their own IRA where it can grow tax deferred. Tax deferral allows the money to grow fast. When the spouse turns 70 1/2 years old, he/she is required to take minimum distributions from the IRA. A lot of 401K plans don’t give non-spouse beneficiaries the same option. They are forced to take the money out of the 401k plan and pay taxes on the lump sum distribution all in one year.
Starting January 1, 2010, a new law that is part of the economic-recovery package Congress approved late last year, non-spouse beneficiaries will be able to rollover their lump sum distribution from a 401k that they inherited to their own Inherited IRA. An Inherited IRA will make the named non-spouse beneficiary take distributions stretched out over their lifetime. The tax bill will be a lot less than if they had to take the lump sum. It also helps the non-spouse beneficiary which is usually the children not blow through the money as fast as if they had all of it in one year.
A lot of problems can occur when the receiving custodian usually a bank or brokerage firm does not handle the paperwork for an Inherited IRA correctly. Obviously this is something they don’t do everyday and a lot of mistakes have been made where the money was rolled over into a personal IRA instead of an Inherited IRA. Make sure the firm you work with knows and understands how to do this or else it could cost you time and unexpected taxable income or penalties.
When inheriting the proceeds from a 401K, you can avoid a large tax bill. Follow the guidelines above to stretch the money over your lifetime in order to add to your financial plan and lower your tax liability.
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