In the 401k retirement plan it is very important to remember that 401k limit change every year. If you still don't know when the maximum contribution limit is increased this is to inform you that every January 1st it can be increased and the maximum contribution limit is based on linving costs you had during the previous year. The new 401k contribution limits are usually announced in the middle of October.
Current limits and the limits from 2009 year are presented below:
Year 2009: $16500 Year 2010: $16500
There are few simple rules that determine the maximum limits in 401k. Basically the combined maximum contribution (in total) which one can make is the lower of two major points: your maximum percentage of salary that employer or different emploeyers allow you to contribute and of course the limitations announced by IRS that are presented above.
Example: let's imagine you earn $70,000 and the employer's retirement 401k plan allows employees to contribute maximum of 8% of their salary then the maximum contribution limit is: $70,000 * 8% = $5,600. $5,6000 is lower than the maximum limit off $16,500 announced by IRS for 2010, so this can mean that the 401k maximum contribution limits apply only for those employees who earn a lot of money. For those who are not interested in such limits there is another option like Roth IRA. All of those for which 401k contribution limits are not properly adjusted or you feel these limits do not fit your financial situation we recommend to read the article about Roth IRA rules and Roth IRA limits.
Now let's talk a bit about catch-up 401k contribution limits. Generally speaking people that are 50 or older are still eligible to make so called catch-up 401k contributions which are some kind of additional contributions to the regular 401k limits but what is important is that employer should first allow for such catch-up contributions. For those who would like to do such additional contributions, the bad news is that employers are not required and not obliged to allow for catch-up contributions. Anyway if you are lucky and your employer allow to do the contributions then you may be interested in maximum catch-up limits. They are as follows:
Year 2009: $5,500 Year 2010: $5,500
Same as for the 401k contribution limits, catch-up limits can be increased every January 1st and they are based on linving costs you had during the previous year. The new 401k catch-up contribution limits are usually announced in the middle of October by IRS.