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Give Your 401(k) a Raise

Have you thought about giving your retirement plan a raise? You can contribute as much as $18,000 to your 401(k) plan account (plus an additional pretax contribution of up to $6,000 if you attain age 50 by the end of the plan year) for 2017. Here’s a look at the potential growth of a single $18,000 contribution using different investment return assumptions:

Years Invested Average Annual Return
4% 6% 8%
5 $21,900 $24,088 $26,448
10 $26,644 $32,235 $38,861
15 $32,417 $43,138 $57,099
20 $39,440 $57,728 $83,897

For simplicity, the results above assume the $18,000 is invested at year-end, though typically, investment occurs throughout the year. Of course, your investment returns may be different from those shown in the table, and you may suffer a loss.

Contributing to your 401(k) plan on a pretax basis lowers your taxable earnings, saving you current income taxes. Tax deferral is not always an optimal approach. It depends on your circumstances and your tax bracket. Contact us if we can help you assess your situation.

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