Many people try to sock away as much as possible when planning for retirement. But even small contributions are important. The minimum amount that can be contributed to a 401(k) plan depends on the rules of the particular plan.
There is no federally imposed minimum contribution to a 401(k), but many plans require participants to contribute at least 1 percent to 2 percent of their salary. This helps offset administration costs.
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One of the safest and most effective paths to a funded retirement is to invest in a 401(k) plan, where employees can allocate and invest a pre-tax portion of each paycheck for their later years.
The program, which gained popularity in the 1980s as an alternative to company pension plans, is often complimented by
employer-matched contributions, according to The Wall Street Journal. Employees control how their money is invested, typically from a menu of mutual funds including stocks, bonds and money market investments.
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How much to invest each year depends on an individual's needs. There is no minimum amount, though employees should try to allocate enough to take advantage of a company match.
The IRS capped contributions at $18,000 for 2015, a $500 increase from the previous year. People age 50 and older can contribute an additional $6,000.
Divided over a full year, that could mean a pre-tax deduction of $346 per week. Holders don't pay taxes until the funds are withdrawn, typically beginning at age 59.5, when the owner is probably in a lower tax bracket.
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