By JLP | December 6, 2006
For Your Information:
I recieved the following information in an email from my wife’s company and thought I would pass it on to you.
401(k) retirement plan contribution limits are increasing again in 2007. For employees under the age of 50, the maximum pre-tax employee contribution to 401(k) plans will rise in 2007 by $500 to $15,500. For those over 50, the limit on pretax elective deferrals will rise from $20,000 to $20,500 ($15,500 plus $5,000 in catch-up contributions).
Remember that these limits do not count against an employer match. In other words, if you make $103,333 and contribute 15% to your 401(k), you will meet the $15,500 limit. In addition, if you get a 3% company match you will get an additional $3,100 deposited into your account, making the total contribution to your account $18,600 for the year. Not too shabby.
One other thing: keep in mind that there are two maximums: 15% of your pre-tax income or $15,500, which ever is smaller. This is wrong. Sorry for the confusion.
The email went on to say:
Additionally, the annual defined-contribution limit (the most an employee and employer together can contribute to all defined-contribution plans combined) will rise to $45,000 from $44,000 in 2007.