If you contribute to a 401(k) plan, you may be happy to hear that this year’s contribution maximum is increasing. In 2008, the tax code allowed employees to contribute up to $15,500. Anyone who turned 50 years old in 2008 could also add a catch-up contribution of $5,000 above this limit, bringing the maximum to $20,500 for these employees.
In 2010, the basic maximum for 401(k) contributions is $16,500. Employees 50 and older can add an additional $5,500. These limits take your pre-tax, after-tax, and Roth 401(k) contributions into consideration, so the sum of all your 401(k) contributions in 2010 cannot exceed the limit for your age group. This limit is the same as last year’s amount. This comes as a pleasant surprise because there has been some discussion about the IRS actually reducing the maximums for 2010.
401(k) contributions may be further limited by your employer. Mine limits 401(k) contributions to 50% of an employee’s salary.
I contributed the full amount of $16,500 to my 401(k) in 2009. Unfortunately, I didn’t realize I had one extra paycheck in 2009, a total of twenty-seven rather than twenty-six. This resulted in my employer diverting no portion of my final paycheck towards my 401(k) and thus I missed out on a small portion of employer matching contribution. Employer matching contributions generally end when your contributions are maxed out.
The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!
401(k) Contribution Limits For 2010
