401k limit 2010 on total contributions was set at $49,000 or 100% of your total compensation. This was no different from the maximum limit in 2009 and wasn’t also increased this year. The US government determines that maximum numbers on contributions to retirement plans by the increase in cost of living every year. Since inflation rate in the previous years was deemed to be relatively low, all the contribution limits have been the same from 2009 to this year. As 2012 approaches, people are still making their predictions if any increase would be given.
The chief source of total contributions for your 401k every year is your elective deferral. This is the amount you’ll forego from your gross salary to be placed by your employer in your retirement plan. The 401k limit 2010 on elective deferrals was $16,500 for a traditional or a safe harbor plan. If you’re participating in a SIMPLE 401k, you could only have a maximum of $11,500. These numbers were also unchanged for this year.
You can contribute a little more if you’re a plan participant who’s at least 50 years old. You can have a catch-up contribution in addition to your standard elective deferral. $5,500 was the 401k limit 2010 on catch-up for a traditional or a safe harbor plan, while $2,500 was the catch-up maximum for a SIMPLE 401k plan. Like the numbers mentioned above, these remained for 2011. Catch-up contribution is something the US government added to the 401k features to help people who are nearly retiring to save some more money before they finally leave the employment world.
There is another pre-tax contribution you can have in your retirement savings, but this one isn’t included in the mentioned 401k limit 2010 of $49,000 or 100% of your total compensation. This is your employer match. Your employer can impose additional contribution to your plan by matching your pre-tax contribution. The most common arrangement is the 50 cents-to-a-dollar match. Your employer gives 50 cents for every dollar of your pre-tax contribution. Your employer can give up to 6% of your total compensation. However, this is not included in the total contribution limit for the year.
The last thing counted towards your total contributions for the year is your post-tax contribution. Aside from all these pre-tax money that can be placed in your retirement savings, you can contribute from your after-tax salary also. You are allowed to give post-tax contribution provided that when it is added to your pre-tax contributions, the sum doesn’t exceed the total contribution limit set for the year.