The 401(k) and IRA Maximum Contribution Limits for 2021

Saving independently for retirement is a good way to ensure that you don't wind up cash-strapped once your career comes to an end and you're left to rely heavily on Social Security to pay the bills. And knowing how much you're allowed to contribute to a retirement plan each year can help you establish a savings strategy that works to your advantage once your time in the workforce is over.

There are several tax benefits associated with saving in an IRA or 401(k). With a traditional IRA or 401(k), your contributions go in tax-free, thereby exempting a portion of your income from taxes. Put $1,000 into one of these accounts, for example, and that's $1,000 of earnings the IRS won't tax you on. Traditional IRAs and 401(k)s also allow for tax-deferred investment growth, which means that when your investments in your account earn money, you're not taxed on those gains year after year like you are in a regular brokerage account.

Image source: Getty Images.

Continue reading

Source Fool.com