401k Contribution and Catch up Limits

Pre-Tax 401k Contribution Limits

Let's take a quick look at the individual pre-tax contribution limits set by the IRS in the recent past and over the next few years:

• 2004 - $13,000
• 2005 - $14,000
• 2006 - $15,000
• 2007 - $15,500
• 2008 - $15,500
• 2009 - $16,500
• 2010 - $16,500
• 2011 - $16,500 plus an index for inflation ($500 increments)

As the table above demonstrates, in 2011 contribution limits that apply to 401k plans will be indexed for inflation - a type of cost-of-living index.  Those limits will move up in $500 increments.

For those of you that had been putting off retirement planning and have reached age 50 or over there is an added perk in the new plan in the form of a catch-up provision.

Pre-Tax 401K Catch Up Limits

A catch up limit is just what it sounds like, the current 401k rules allow for plan participants that reach age 50 before the calendar year is over to make additional catch up contribution limits on a pre-tax basis as shown below:

• 2004 - $3,000
• 2005 - $4,000
• 2006 - $5,000
• 2007 - $5,000
• 2008 - $5,000
• 2009 - $5,500
• 2010 - $5,500
• 2011 - $5,500 plus an index for inflation ($500 increments)

As was the case with the "standard" contribution limits, the "catch-up" contribution limits will continue to be indexed for inflation in 2011 and can increase in $500 increments.  In 2010, the catch-up limit remained at $5,500.

for more info, please refer to:

http://www.money-zine.com/Financial-Planning/Retirement/401k-Contribution-and-Catch-up-Limits/