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Sponsored 401k Contribution Limit Results:
2007 401k Maximum Contribution Limits, Calculator
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Published: November 1, 2006
401k contribution limits depend yearly and on the specific plan your company uses. Maximum contribution limits are usually set by the company you work for as a percentage of your salary in tandem with the government's fixed limit. If you make $50,000 a year before taxes and the company you work for has a 401k contribution limit at 10 percent of your salary, you can only put a maximum of $5,000 into your 401k.
The government limit is adjusted per annum as the cost of living increases with inflation. For 2006, the maximum contribution limit was set at $15,000, so if you make $220,000 you cannot simply contribute 10 percent of the salary as it would be over the government-set maximum. On the other side, if you want to put more money into a 401k and you are under the government-set maximum, you cannot deposit more money into your 401k as long as the company you work for has a pre-set percentage maximum.
There are a variety of reasons for set 401k contribution limits. On the company side, certain plans incorporate a matching contribution percentage - where the company you work for will match, say, 4 percent of your contribution to your 401k. If they allowed you to contribute more money, they would be giving out too much money. On the upside, however much money your company matches, if you are looking to maximize your contribution, the money does not count in any maximum contribution limit. Therefore, if you are going to contribute the maximum $15,000 a year (supposing you work for a company with a 10 percent maximum contribution and you make $150,000), the amount of money that the company will additionally contribute will be allowed to go over the maximum contribution limit set by the government.
Another 401k contribution limit pertinent to those above the age of 50 (or who will be by the end of the year) is the catch-up contribution limit. It is an additional lump sum of money that can be put away into a 401k to make up for years you have perhaps short-changed contributions to your 401k. Things happen (like college, bills, etc.) that don't give us the chance to maximize our contributions to our 401k's–but we should always try, this is un-taxed money that will compound over the years (the longer the better). Regardless, the catch-up contribution comes in for those unforeseen (and some predicted) expenses where we don't donate as much to our 401k as we would have liked. The 401k contribution limit in 2006 for someone over the age of 50, via the government, is $20,000 (as opposed to the $15,000 limit for others).
If you need help managing your contributions, check a contribution calculator on the internet. A couple listed below for easy access. Remember: save money early and you will have more for later, it's hard to play catch-up.
401k Calculator. 2006. Paycheckcity.com. 30 Oct. 2006 http://www.paycheckcity.com/cobsw/401kcalculator.a sp.
401k Contribution Calculator. 2006. Standard & Poor's. 30 Oct. 2006 http://fc.standardandpoors.com/htdocs/calculators/ acon/calculator.jsp?toolid=000586.
IRC 401k plans. 2006. United States Department of the Treasury. 30 Oct. 2006 http://www.irs.gov/retirement/article/0,,id=120298 ,00.html.
Woodward, Dustin. "401k Contribution Limits." 2006. About.com. 30 Oct. 2006 http://mutualfunds.about.com/od/retirement/a/401k_ limits.htm.
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The government limit is adjusted per annum as the cost of living increases with inflation. For 2006, the maximum contribution limit was set at $15,000, so if you make $220,000 you cannot simply contribute 10 percent of the salary as it would be over the government-set maximum. On the other side, if you want to put more money into a 401k and you are under the government-set maximum, you cannot deposit more money into your 401k as long as the company you work for has a pre-set percentage maximum.
There are a variety of reasons for set 401k contribution limits. On the company side, certain plans incorporate a matching contribution percentage - where the company you work for will match, say, 4 percent of your contribution to your 401k. If they allowed you to contribute more money, they would be giving out too much money. On the upside, however much money your company matches, if you are looking to maximize your contribution, the money does not count in any maximum contribution limit. Therefore, if you are going to contribute the maximum $15,000 a year (supposing you work for a company with a 10 percent maximum contribution and you make $150,000), the amount of money that the company will additionally contribute will be allowed to go over the maximum contribution limit set by the government.
Another 401k contribution limit pertinent to those above the age of 50 (or who will be by the end of the year) is the catch-up contribution limit. It is an additional lump sum of money that can be put away into a 401k to make up for years you have perhaps short-changed contributions to your 401k. Things happen (like college, bills, etc.) that don't give us the chance to maximize our contributions to our 401k's–but we should always try, this is un-taxed money that will compound over the years (the longer the better). Regardless, the catch-up contribution comes in for those unforeseen (and some predicted) expenses where we don't donate as much to our 401k as we would have liked. The 401k contribution limit in 2006 for someone over the age of 50, via the government, is $20,000 (as opposed to the $15,000 limit for others).
If you need help managing your contributions, check a contribution calculator on the internet. A couple listed below for easy access. Remember: save money early and you will have more for later, it's hard to play catch-up.
401k Calculator. 2006. Paycheckcity.com. 30 Oct. 2006 http://www.paycheckcity.com/cobsw/401kcalculator.a sp.
401k Contribution Calculator. 2006. Standard & Poor's. 30 Oct. 2006 http://fc.standardandpoors.com/htdocs/calculators/ acon/calculator.jsp?toolid=000586.
IRC 401k plans. 2006. United States Department of the Treasury. 30 Oct. 2006 http://www.irs.gov/retirement/article/0,,id=120298 ,00.html.
Woodward, Dustin. "401k Contribution Limits." 2006. About.com. 30 Oct. 2006 http://mutualfunds.about.com/od/retirement/a/401k_ limits.htm.
