401k Maximum Contribution Limits
401k Limits Change Every Year
It is important to understand that with each new tax year the laws on savings can change along with the tax code. In order to use your 401k account is is important to keep up with those laws. In 2011, the cost of living has not risen according to the US Government, therefore the limits in 2011 remain at 2010 levels which is the lower of two levels. The first level is $16,500. The second level is whatever that is set by your employers’ maximum percentage; for example if the maximum is 10% of your income and you make $50,000 per year then your maximum input into your account remains at $5,000 per year. Keep in mind this is accumulative for all of your 401k accounts together as opposed to each individual one.
Catch-Up 401k Limits
Beyond the $16,500 you could be eligible to contribute an additional $5,500 if your employer allows it. Your employer is not obligated to allow the catch-up plan. These to, like the base limit of $16,500 can rise with the cost of living adjustment.
401k Rules for Two or More Plans
As stated previously in this article, the maximum is a combined rate. If you have more than one policy then the limit doesn’t rise or fall. Your combined contribution in all of your 401k accounts cannot exceed $16,500.
Employer Matching Contributions
When your employer matches your contribution it does not count towards the maximum contribution limit at all. This includes of course if you put in the maximum, your employer’s contribution adds to these limits. That being said, depending on the design of the 401k it may or may not be exempt from taxes.
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