401K Contribution Limits and Catch Up Provisions for 2010 & 2011

by Fern LaRocca CFP®

in 401k Contribution Limits

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As you look at your 401K contribution limits for 2010, you may realize that you didn’t put as much in as you would have liked. It’s not too late! Head down to your Benefits department or Human Resources and let them know that you would like to get more into your 401K plan before the end of the year.  They can make the adjustment to get how much you want into the plan for the next payroll. As a reminder here are the numbers to get the 401K maximum:

2010 401K maximum compensation limit: $245,000

401K contribution limits: $16,500

401K  catch up amounts for those age 50 and over: $5,500

Start planning on making the maximum 401K contributions for 2011. As you can see below they are the same as 2010.

2011 401K maximum compensation limit: $245,000

401K contribution Limits: $16,500

401K catch up amounts for those age 50 and over: $5,500

Why would you want to put in the 401K maximum 2010 amount? To get cash fast. How so? For every dollar invested in a 401K plan, part of that dollar is returned to you in tax savings. The higher your tax bracket, the higher amount you will get back on your tax return.

Think you can’t afford to tie up your money till you are age 59 and a half? Think again. With the tax savings and the tax deferral on the amount earned, you can’t afford not to. It is the fastest way to grow your money and keep ahead of taxes and inflation. No other investments (unless they are high risk) can do that.

What if you can do more than the maximum 401K contribution limits for 2010 and/or 2011? Then put money into a Roth.

You won’t miss the money. Go ahead and max out your 401K contribution limits before the end of the year.

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