If you have a 401k retirement account, you can add more money to it once a month, by changing the amount of your monthly salary you want committed to the 401k, until you reach the yearly maximum. You are not allowed to contribute to your 401k through other means, such as writing a check, or transferring money from another account.
If you have a 401k account, you are most likely contributing to it through your employer, who will hopefully be making a contribution as well. You authorize the company to put a certain percentage of your monthly income into the 401k plan, by automatically deducting it from every paycheck. Under current law, you are allowed to contribute a maximum of $15,500 to your 401k plan, and that number will most surely rise in 2009. Bear in mind that if your company is matching a percentage of your contributions, this money does not count towards the $15,500 limit. This same limit applies to people who are freelance, or who have a 401k plan outside of their salaried employment.
Because 401k's have somewhat complicated tax requirements, guidelines and stipulations, they can only be contributed to through payroll deductions on a pretax or after-tax basis. This is because one of their main attractions is their tax status depending on the type of 401k you have, you might not have to pay taxes on your savings or the profits or interest you make from your 401k investments. So, for example, if you were to contribute to your pretax 401k by just moving some money into it from your savings account, you would be adding money which you've already paid taxes on but the money in your 401k account has not been taxed yet because youre still working, and can't access your 401k.
It's imperative that you sit down with a financial adviser before you open a 401k account. They can be fairly complicated, and you dont want to make any mistakes when it comes to your money, your future and your dreams.
