Almost all kinds of IRS approved retirement plans have their own contribution limits that are set almost every year. In 2012, the individual 401k limits in terms of contribution are $17,000 for participants 50 years old and below and $22,500 for those who are 50 years and above ($17,000 plus $5,500 catch up). For 2013-2014, the limits for solo 401k contributions are higher by $500—$17,500 for below 50 years old participants and $23,000 for older than 50 years old.
The increase in contribution limit is not to pressure a participant to shell out more amount of money on their retirement plan. The set limit is merely a guide and not necessary for a participant to satisfy. This increase is neither for the benefit of another party nor the IRS, because the increase in the limits on your contribution is to provide you with a wealthier retirement account. The more money there is in your retirement plan the richer you would become in your later years.
Contributing more and maxing out up to the Individual 401k limits provide sure funds to spend for retirement
The first thing why the set limits in your Individual 401k contributions are increasing is because of the inflation. You must not expect that the standard cost of living these days would still be the same 10 to 20 years from now. Expect that prices in consumer goods, healthcare, and other living expenses will likely to increase by who-knows-how-much by the time you settle for retirement. Maxing out your contribution up to the individual 401k limits will most likely ease your burden if inflation rate keeps going.
Furthermore, when you contribute up to the limit of your Solo 401k self directed retirement plan, that means you have more money to invest in your chosen non-traditional assets. Keep in mind that a self directed retirement plan gives you unlimited investment options. This allows a participant to allocate his or her retirement funds in different assets which provides a diversified retirement portfolio needed for a more secure retirement planning.
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