Personal Finance

Can I Add More Money to My 401k Account Whenever I Want?

If you find yourself between jobs or if your employer doesn’t offer a 401k retirement account, you might be wondering, “Can I add more money to my 401k?” Unfortunately, 401k plans are sponsored by employers and must be done through payroll, which means you can’t add extra cash to your account unless it’s funneled from your paycheck.

However, you’re not out of luck when it comes to saving extra money for retirement planning.

401k Plan Contributions Explained

Although 401ks are not the only means of saving for retirement, they offer many perks that make them appealing. Many companies will match all or part of your savings up to a certain percentage through employer contributions. For example, if you make $80,000 per year and your employer matches 100 percent for the first 3 percent of your 401k contributions, that’s like getting a free $2,400 per year for retirement. Even better, employer contributions don’t count toward your maximum 401k contribution.

The 401k contribution limits are also slightly higher than the limits for an IRA. For 2016 and 2017, you’re allowed to contribute up to $18,000 of your salary to your 401k. If you’re 50 or older, however, 401k rules allow you to make an additional catch-up contribution of as much as $6,000, for a total of up to $24,000. Note that 401k limits can change from year to year to track inflation.

Although you can’t write a check or deposit cash straight into your 401k account, there might be options for you to increase your contributions before the end of the year. Check with your plan to discover how often you can make a free change to your contribution limits.

401k Alternatives

Just because you can’t add more money to your 401k plan doesn’t mean you have to stop saving money toward retirement altogether. Instead, here are a few retirement account alternatives:

  • IRAs: AnIndividual Retirement Account is separate from your retirement account with your employer. You can manage your IRA portfolio using every investment tool available, unlike a 401k account which limits you to a select portfolio through your employer. However, IRAs do have a contribution limit of $5,500 a year. There are two different types of IRAs: A traditional IRA, for which contributions are tax-deductible, but withdrawals are taxed, and a Roth IRA, for which contributions are taxed, but growth and withdrawals are tax-free.
  • Bonds: Bonds are regarded as a safe investment because they’re considered to be like a stable savings account. Bonds earn interest at the rate offered at the time of purchase.

When it comes to retirement savings, start as early as possible, but know that it’s never too late to start. Although you can’t boost your 401k account by adding cash into it whenever you like, you might be able to increase your paycheck contributions for free. If you can’t change your contribution percentage or you don’t have a 401k account, IRA accounts and bonds should be your next choice.

This article was originally published on GOBankingRates.com.

Plus:

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How to Master Your 401k in Your 50s

How to Teach Your Kids to Be Responsible With Money

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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