401K Contribution Limits Can Always Be Profitable

by Fern LaRocca CFP®

in 401k Contribution Limits,401k Contribution Limits

Your 401k contribution limits can always be profitable. But how? Think about what it takes to earn money. To be profitable your 401k contribution limits must keep up with inflation, and stay ahead of taxes. Your contributions do all of that and more–much more than any piece of real estate or outside brokerage account.

First, your 401K contribution limits are added to your 401K plan account without tax so right there you are saving money. Then the money that is invested in your 401k grows without tax. Again, you are saving money. No taxable brokerage account can grow as fast because you have to pay tax on interest, dividends, and capital gain distributions on the earnings inside of a regular brokerage account.

The higher your tax bracket, the more return you will need to keep up with inflation and taxes. With your money invested in a 401K, there are no taxes on the money contributed and no tax on the money earned, so right away you have more opportunity to keep up with taxes and inflation.

Make your 401k contribution limits profitable. Make the most of your 401K plan by contributing all that you can.

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