I'm 51 years old. Is it a percentage or lump amount for everyone...I received info from my retirement rep., but he said "the maximum normal amount is $15,000 and increases to $20,000 after age 50" but I am confused if this is the maximum for a any salary such as someone making $200,000 and there is a maximum cap... is it a percentage for everyone with a max cap at $20,000 if over 50? If it is a percentage, he is misleading me because I make under $50,000 and if it is a percentage, I could not save that much...If I saved 15% then I would be only able to save $7,500 or so at most
2006-12-28 05:39:33 · 4 answers · asked by Ford Prefect 7 in Business & Finance ➔ Personal Finance
The 2001 tax act did away with the percentage limit on salary deferrals into a 401 K plan. Prior law limited the deferral to 25% of compensation, the new law allowed employers to amend the plan to allow an employee to defer the lesser of $15,000 or 100% of salary. The $5,000 catch-up deferral can be done by anyone who will be 50 or older by December 31, 2006.
If the employer has adopted a profit sharing plan they could elect to contribute to your account a percentage of your salary ranging from zero to a maximum of an additional $29,000. The employer contribution cannot exceed 25% of your salary.
2006-12-28 07:41:25 · answer #1 · answered by waggy_33 6 · 1⤊ 0⤋
The 2006 401(k) maximum contribution for a 51-year old is $15,000 + $5,000 catch-up for a total of $20,000 a year.
You would also be allowed to contribute $4,000 + $1,000 catch-up amount to a Roth IRA for a grand total of $25,000 for tax years 2006 and 2007.
With that in mind, you are basically allowed to save 50% of your income. Not knowing your full financial situation and if your company matches a certain percentage of your 401(k) contributions, it would be prudent to tuck away as much as you can into the 401(k) account up until the match has been met, making sure NOT to leave any money on the table from your employer.
From there, if you haven't opened a Roth IRA, I would recommend opening one and trying to maximize that account as well.
It might be wise to set some goals for yourself for the upcoming year as far as what percentage you want to tuck away for retirement.
2006-12-28 06:19:33 · answer #2 · answered by JRockLC25 2 · 1⤊ 0⤋
You can actually save more than that if you wish, but only a certain cap amount is protected from taxation. That's up to you.
Whatever you are unclear about, call him and have him explain it to you again. That's what he gets paid for.
2006-12-28 06:01:04 · answer #3 · answered by Ambassador Z 4 · 0⤊ 0⤋
The maximum is in dollars, not a %. He is correct when saying you may save up to 20k in a tax deferred ira or 401k after age 50.
doesnt mean you have to.
2006-12-28 05:44:27 · answer #4 · answered by Anonymous · 1⤊ 1⤋