Welcome
401(k) Limits
There are several
annual contribution limits that apply to 401(k) retirement plans.
These 401(k) contribution limits are placed both on the employee, as
well as the employer. In addition, there are rules pertaining to
pre-tax contributions versus an individual’s total contributions
into the plan.
In 2009 and 2010,
an employee’s annual 401(k) contribution limit is $16,500. In the
years following, annual 401(k) contribution limits will be indexed
for inflation, and can be increased in increments of $500.
For employees age
50 and over, there is an additional amount of “catch-up”
contribution allowed. In 2009 and 2010,
this amount is $5,500, making the total annual 401(k) contribution
limit for individuals age 50 and older $22,000. In the years 2011
and beyond, this catch-up contribution may also be raised, indexed
for inflation, in increments of $500.
401(k)
contributions have either stayed the same or increased in each of
the past several years, as noted in the chart below.
Year
Age 49 & Below
Age 50 & Over
2005
$14,000
$18,000
2006
$15,000
$20,000
2007
$15,500
$20,500
2008
$15,500
$20,500
2009
$16,500
$22,000
2010
$16,500
$22,000
Unlike other
qualified retirement plans, employees do not have to worry about
compensation limits with 401(k) plans. Therefore, regardless of an
employee’s compensation, they are eligible to participate in a
401(k) plan as long as their employer offers one.
One thing to keep
in mind is that all of the deferred compensation plans an individual
has must be considered when totaling their overall contribution
limit. For example, an individual’s maximum contribution limit is
the total of all contributions put into ALL qualified
plans annually.
