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 Last week we refreshed all of the articles in our tax section and this week we've updated our retirement section to reflect changes in 2006. Here we are just going to talk about changes to 401k plans in 2006 but the other retirement topics - including IRAs, 403b plans, and Roth IRAs have already been updated.
Maximum Contribution Limits for 401k Plans
For 2006, the maximum contribution limit to a 401k plan is $15,000 - that's up from $14,000 in 2005. Future contribution limits for 2007 and beyond are going to be increased for inflation and that's thought to be around $500 each year. That means the 2007 contribution limit will probably be $15,500.
Catch Up Contributions
For those of you that reach age 50 or older by December 31, you're eligible for an additional catch up contribution to your 401k plan. In 2006, the catch up contribution is $5,000 - that's up from $4,000 in 2005.
Additional Contribution Limits
The contribution limits just mentioned apply to those that the employee or individual can make to their 401k account. In addition to these limits there are limits to all the contributions that can be made including employee contributions, elective deferrals, employer matches and discretionary contribution to your account.
The total of all the above mentioned contributions cannot exceed the lesser of 100% of your compensation or $44,000 in 2006 - that's up from $42,000 in 2005. In addition, the compensation that can be used to calculate employer and employee contributions is capped at $220,000 in 2006, up from $210,000 in 2005. |
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