A 401k is a powerful investment tool to help you plan for your retirement, but the government has set limits on how much you can contribute to your plan each year.

A 401k plan lets employees invest retirement savings into a mutual fund or similar investment. Often employers will match employee contributions to the plan, making them an attractive way to fund your retirement because you’re already doubling your money going in. Sweetening the deal is the fact that taxes that would normally be applied to these investments are deferred.

There is a limit to how much employees can invest each year into their 401k plan. The federal government sets limits upon the total amount that can be contributed by employees tax-free. This limit was recently raised, however.

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