2011 401k contribution limits announced

From the Sunday WSJ


The maximum annual contribution an individual under age 50 can make to a 401(k) plan will stay put, at $16,500, for 2011, according to the Internal Revenue Service.

Total contributions to the tax-deferred retirement plans, including employer matching contributions, will remain unchanged at a maximum of $49,000.

The catch-up contribution limit for those 50 and over also remains unchanged at $5,500.

It will be the third straight year without an adjustment for inflation, which is generally based on the consumer price index. The contribution maximum has risen annually in all but six years since inflation adjustments began at the end of 1987.

The annual maximums also apply to 403(b) plans for education and nonprofit workers, 457(b) plans for state and local government employees and the Thrift Savings Plan for federal-government employees.

“This certainly will have an impact on folks because they want to save as much as they possibly can and their limits are being held down,” says Gerald J. Wernette, director of retirement plan services at Rehmann Financial, a financial-services firm in Saginaw, Mich.

To maximize their investments, married couples should make sure both spouses are putting the allowed maximum into their tax-deferred plans. That means each spouse can have a total maximum contribution, including matches, of $49,000.

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