401K Limit question

**Broken Arrow** · 08-21-2009, 06:33 AM

Basically, you can contribute up to $16,500 of your own money, regardless of what the employer match is.

More specifically, both your contribution and your employer match can not exceed either 100% of your own compensation or $49,000 total in a given year, whichever comes first.

Source

**disneysteve** · 08-21-2009, 05:44 PM

Originally posted by Broken Arrow View Post

More specifically, both your contribution and your employer match can not exceed either 100% of your own compensation or $49,000 total in a given year, whichever comes first.

This also depends on the rules of your particular plan. For example, my wife's plan only allows her to contribute 50% of her income. We wanted to do 100% but she was not allowed to (even though it would be well under the dollar limit).

**KTP** · 08-22-2009, 09:23 AM

Wait, so you can sometimes contribute 100% of your income to a 401k?

How can you determine who qualifies for this? Is it only up to the company you work for?

If I got a part time job where I made less than 16,000 a year is it possible I could contribute all of that to my own 401k and thus not increase the tax burden of our household? (My spouse's high income would put me in a 38% tax bracket for any income I make, which is one of the reasons I have not seriously looked into taking part time work...the costs of working (car, clothing, etc) part time would not be viable if I had to pay over 50% in taxes (counting SS, medicare). If I could *hide* this extra income totally in a 401k, then I would seriously consider working several months out of the year.

**Broken Arrow** · 08-22-2009, 12:19 PM

Thanks Steve. I did not realize that. Kind of strange to me that an employer would make such a rule.

KTP, I'm no expert on this nor do I play one on TV. But essentially, yes, I believe so. I remember a co-worker who did just that because the money her husband makes is enough for both of them to live on.

So long as your employer doesn't have a problem with it, I don't see why not.... I myself contributed as much as 80% for a short while this year (because I was changing employer mid-year and I was trying to max out their benefits before I left).

**MonkeyMama** · 08-22-2009, 01:30 PM

It's not necessarily the "employer's" rule. 401k plans are extremely complex.

The structure of any 401k plan, and limits on contributions and matches, are dictated by Federal laws.

Every employer is going to be different. Different parts of the law are more detrimental or beneficial for different types of businesses.

**MonkeyMama** · 08-22-2009, 01:31 PM

Originally posted by KTP View Post

Wait, so you can sometimes contribute 100% of your income to a 401k?

How can you determine who qualifies for this? Is it only up to the company you work for?

If I got a part time job where I made less than 16,000 a year is it possible I could contribute all of that to my own 401k and thus not increase the tax burden of our household? (My spouse's high income would put me in a 38% tax bracket for any income I make, which is one of the reasons I have not seriously looked into taking part time work...the costs of working (car, clothing, etc) part time would not be viable if I had to pay over 50% in taxes (counting SS, medicare). If I could *hide* this extra income totally in a 401k, then I would seriously consider working several months out of the year.

Yes - 100% - after you pay social security and medicare taxes, anyway. More likely if you work for certain types of employers.

If my spouse returns to work I would hope he had 401k benefits and could max out. Wonderful tax break!

**safari** · 08-22-2009, 05:40 PM

My employer limits my 401k contributions at 10% of my salary, even though 10% of my salary is less than $16,500.

**KTP** · 08-23-2009, 10:13 PM

Hmmm..if I do return to the workforce one day, I may have to make that a stipulation of being hired. I wonder if a company will give you this information before an interview...

Would you say it is most, some, or very few companies that would actually let you select 100% of your income to go to a 401k contribution?

I am curious why a company would limit your contribution at all..especially if they are not matching it. Why do they really care if you are contributing 10% or 50% to the 401k if it makes no difference in their payroll?

**Alex_Adviser** · 08-23-2009, 10:29 PM

The limit of $16500 is you contribution to the 401K and not your employer.

But, if your employer's 401k plan allows you to contribute up to a maximum of 10% of your salary, and you earn $50,000, your maximum contribution limit is $5,000 and not the $16,500.

The matching contributions made by your employer are NOT counted toward your 401k contribution limits. Even if you contribute the maximum amount each year, your employer's matching contributions are in addition to these 401k limits.

401K Limit question