401k Contribution Limits

The Maximum Contribution for Fiscal 2004-2010 and Beyond

What is the maximum contribution limit on your 401k account? The answer depends on your plan, your salary, and government guidelines. In short, your contribution limit is the lower of the maximum amount your employer permits as a percentage of salary (e.g., if your employer lets you contribute 4% of your salary and you earn pre-tax $20,000, your maximum contribution limit is $800), or the government guidelines as follows:

401k Maximum Contribution Limits
2004: $13,000
2005: $14,000
2006: $15,000
2007: $15,500
2008: $15,500
2009: $16,500
2010: $16,500 plus inflation index (in $500 increments)

Once the year 2010 has been reached, the total maximum contribution limit will be increased based on changes in the cost of living (link url=http://beginnersinvest.about.com/od/inflationrate/a/inflation.htm]inflation) in increments of $500.

Catch Up Contributions

If you are fifty years or older and your employer offers “catch-up” contribution for your 401k, you are eligible to contribute additional amounts up to the maximum contribution limits as follow:

401k Maximum Catch-Up Contribution Limits
2004: $3,000
2005: $4,000
2006: $5,000
2007: $5,000
2008: $5,000
2009: $5,500
2010: $5,500 plus an inflation index (in $500 increments)

Once the year 2010 has been reached, the total maximum contribution limit will be increased based on changes in the cost of living (inflation) in $500 increments.

A Reminder on Employer Matching Contributions and 401k Contribution Limits

Once again, employer matching contributions up to six-percent of an employee’s pre-tax salary are not included in the contribution. For example, if you qualified, you could make a 401k contribution of $16,500 in 2009 and have your employer still match the first six-percent of your salary; that match would be deposited above and beyond the $16,500 you contributed directly.