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Home » 401K, Retire, Retirement Planning, Workplace Finance

2011 IRS Maximum Allowed 401k Contribution Announced

Last updated by on October 23, 2015

Update: the 2012, 2013, 2014, 2015, and 2016 401K maximum contribution amounts have now been released since this post was written. What follows is for 2011.

This past week, the IRS 2011 401K maximum announcement finally came.

The Maximum 401K Contribution in 2011 will be…

Identical to 2009 and 2010. Bummer, dude.

That’s right, the IRS 2011 maximum 401K contribution limit will stay the same as the 2009 and 2010 401K maximum contribution at $16,500 ( 2012, 2013 did see increases). This also goes for 403B and 457B plans. The maximum 401K catch-up contribution per year for those over 50 years old will stay the same at an additional $5,500 over the standard contribution. For reference, the last increase was when 2009’s 401K maximum had increased $1,000 over 2008’s $15,500 maximum. I have to admit, I’m very disappointed to hear this news.

The Sad Part of 401K Maximum Contributions Staying the Same

401k maximumThis news is disappointing when you take into consideration the fact that the maximum contribution level has increased in all but six years going back to it’s beginning in 1987 (almost 3/4 of the time). Now we’ve gone three years without an increase (for the first time in history). It’s also worth noting that in that time period the maximum 401K contribution amount has never declined.

The Ironic Part of 401K Maximum Contributions Staying the Same

Last year, there had been rumblings that the maximum 401K contribution level might actually decrease in 2010 for the first time due to the Consumer Price Index (CPI) decreasing year over year. Thank goodness, it didn’t

But what is ironic about this IRS decision is that the federal government has a very determined effort to keep mortgage rates artificially low right now and has started to use other quantitative easing tactics to increase inflation. At the same time, the value of the dollar has plummeted. Food and gas prices have skyrocketed. Yet no 401K increase? Of course not, the fed wants us to spend that money to stimulate the economy!

Looking to Diversify Beyond your 401K?

Mad that the 401K max limit didn’t increase? Start up a Roth or Traditional IRA. I moved my traditional and Roth IRA to TradeKing, who has zero maintenance fees and trades are only $4.95. You’ll probably be saving money on fees versus your 401K.

401k Discussion:

  • Are you excited, disappointed, or indifferent to this 401K news?
  • Do you plan on maxing out your 401K in 2010 or 2011?
  • Have you ever maxed out your 401K?

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About the Author
I am G.E. Miller, & this is my story. My goal is financial independence ASAP. If you share that goal, join me & 10,000+ others by getting FREE email updates. You can also explore every post I have written, in order.

  • Ron Ablang says:

    Is it possible for anyone to max out if they don’t have a mortgage, married w/ kids, and don’t make over $100k a year? I’ve never come close to maxing out.

    • Geoff Stanton says:

      It is very possible to max out a 401k every year – it is called pay yourself first. Take the $16500 (or $22K, divide that number by your annual salary (or projected annual total). That percentage will give you what you need to set your allocation to so you max out. In may case, since I am over 50, I need to set aside 40% of my pay. It was tough for the 1st couple pays to get used to the lower paycheck but you have to sacrifice a little now to have a ton of money for retirement later. If you have to, cut out the Starbucks in the morning, bring your lunch to work, and eat at home almost every night. The money you save right there can add up big over a year’s time. Since I am assuming you are younger, I thought I would reiterate that Social Security may not be there for you when you retire and most people only get like $1000 a month from it anyway. Definitely not enough to live comfortably in old age on.

      • Marie says:

        Maxing out at $16,500 means deducting $687.50 from every paycheck, or $1,375 a month. I don’t know many people who can afford to give that up every month and still pay the rent.

        • Ken says:

          If you’re contributing to a traditional 401k, those are pre-tax amounts, take-home impact is closer to $500 each paycheck.

          That said, $16,500 is a large number, yes. However, you’re comparing all or nothing. Saving $0/year is foolish; if we assume you were already saving $8K a year and decided switch to maxing out, the net impact is half as bad as you say.

          Also, spending naturally rises to meet available money. It may seem impossible to free up $1375 a month, but if it was taken out of your paycheck from the very beginning, it wouldn’t seem as bad. It’s easy to increase spending, but you’re right, it’s hard to decrease spending. You might try gradually raising your contribution levels until they reach your goal.

          • Tom says:

            totally agree! good post.

          • Andrew says:

            It may seem like a lot but try putting every rasie you get, 3% per year into your 401k and after several years you will be putting in 12-15% of your pay….reaching the max goal.

          • Todd H says:

            Let’s be real…saving only $16,500.00 a year is not nearly enough to retire on….but at lease it’s a start.

        • Kerry says:

          It’s true, some people truly could not afford to give up that much every month (after all, it’s MORE than someone in New York State working minimum wage grosses). However, many people just THINK that they can’t. Some tests: ask yourself how you would manage if you lost your job, and had to take a job that paid $16,500 a year less (a very accurate example, because that is also $16,500 less income that you would have to pay taxes on – just like contributing to a non-Roth 401K). Or, if you’re married, how would you manage if you or your spouse lost their job and had to survive on just the one income (I lived this one…) Many married couples treat one of their incomes exactly this way, and save it all.

          • Tori Chen says:

            I am getting closer to maxing my 401k. I probably make less than you, the reader, but in my first year I contributed $500 every 2 weeks or ($12,000.00) and still had plenty for rent, meals out, bar money, savings account deposits and pay student loans! Reducing our taxable income is the main goal, right? I even had a health savings account, but that was a waste of money. Don’t ever get one unless you 1)Have friends that are willing to buy your band-aids at retail 2)Have (or plan to have) preexisting health problems or 3)Know a crooked doctor…

            The trade off? No more overseas travels until 2012, 2013, or whenever the situation in Japan improves.

            I am also in the process of redoing my budget so I can find more room for savings and finally start a Roth IRA. Having a budget and being able to visualize where all one’s hard earned money is wasted really helps. And yeah, I too eat at home, will probably stop drinking out (I rarely drink at home), am not married ;_( (hint hint), and do not have any kids that I am aware of…

        • LisaG says:

          I max out a 403 and 457 at 32K a year on a 69K salary. I will be changing that this year to 22K per account (44K) total since I will be 50. It hurts not to have much of a paycheck, but we live frugally. We have been savers for 25 years so we have no car note (pay cash from savings about every 7 years for a new car) and we have a mortgage that is 3 times lower than what we could qualify for. It takes lots of patience and sacrifice to pay yourself first, but the long term benefits are worth it.) Start saving and don’t take that expensive 5K vacation, but rather the 1K vacation. You dont have to have the newest everything, and you will be able to do it. It is really a discipline game. Use coupons, don’t eat out expensively, give less big gifts, no new clothes all the time. Whatever it takes!

    • Ralph says:

      Yes it is possible since you indicated you have no mortgage although it depends on the factors that if you kids are still at home and how much are their expenses! It also will involve a lot of sacrifice on your spending habits too, to make it possible.

      Good luck.

    • Ann says:

      Ron, I have 3 mortgages, am married, and have a kid. I don’t make over $100k a year. I am maxing out my 401(k). It hurts, but it can be done.

    • Dingo says:

      I’m happy to say that I didn’t have a mortgage with income less than $100K and I was able to max out my 401(k) for two years in a row and my Roth IRA. After that, I got married and both my wife and I were able to max out out both again. By maxing out the 401(k) we were then eligible to max out our Roth IRAs.

  • Julie says:

    Ron, I think it’s easier to max out if you don’t have a mortgage and children, actually.

    I’m not maxing out at this point, but I can easily see someone making 75k maxing out their 401K.

    I’m disappointed that the limit isn’t increasing. Even though I am not maxing out my 401K contribution this year, when I am financially able to do so, a higher limit will of course be better.

    I’ve never maxed out my 401K, but I do plan to within the next 5 years (I’m 23 now, and contribute about 25% of my salary).

  • Wizard Prang says:

    “I moved my traditional and Roth IRA to , who has zero maintenance fees”

    The suspense is killing me!

  • Chris says:


    I’m also bummed that the contributions limits are staying the same. This was the first year that I maxed out (in May) and I’d love to be able to contribute even more.

    Ron, it is possible it just required sacrifice on my part. I only maxed out this year because I was laser focused on it. I do have a mortgage, but don’t have kids, so I can certainly understand how the added expense of little ones makes it more challenging.

  • Jil says:

    I understand that people may be bummed about the lack of increase, but look at other countries policy surrounding retirement and personal finance. I understand people are looking for every inch that will help them, but what about the “personal” in personal finance? Get a Traditional or Roth IRA. Those maxed out too? get an investment account or CD ladder or high-yield savings account and put away more. Come on people and do what you can.

  • kelli says:

    does anyone know if the Roth levels for 2011 will change? I am really hoping so!

  • Randy says:

    I have been maxing out for the past 6 years and it would have been nice and simple if the limits would have increased.

    I am under the impression that since I am maxing out I can not contribute additional funds to a IRA neither traditional or Roth, am I correct?

  • Chris says:

    You can contribute to a Roth IRA — I do …. provided you’re not over certain income limits for modified adjusted gross income… I think like $105k?

  • mike says:

    I recommend maxing out your 401k, I made amistake and did not contirbute for many years, now I ma playing catch up-

  • Sharon says:

    I have no mortgage and have been able to max out the last few years. My car has paid for. I also have the most basic cell phone and plan, most basic TV service, phone service, etc. I bring my own food to work for breakfast and lunch and I don’t waste money on water or sodas. I make my own coffee and don’t buy single cups of coffee or fast food. I take care of my health by watching what I eat and exercising (saves on medical expenses – prescriptions, etc.)Maxing out can be done (or coming closer) if people do without more of what they don’t really need. Yes, I do consider myself lucky, but I earned it.

  • Jessica Bosari says:

    I don’t think an increase would have helped much anyway. People are focused on reducing debt more so than saving right now.

  • Heather says:

    The 401K limit is adjusted annually for inflation. No inflation=no contribution increase. Arguably a contribution increase would only mean that your dollars aren’t going as far.

  • David says:

    Don’t get too focused on max… focus on the right investment. If you have company matching that’s priority 1 as it’s free money – contribute the amount needed to get all the matching funds. Then, if you qualify for a Roth, max that. After that’s maxed, or if you don’t qualify, max your 401k from the personal contributions. After that then start looking at stocks/munis/etc. Yeah, you could work for a better return if you had the time to play the market and do the research but the first three steps (company match, roth, 401k match) will yield the best tax position and long term advantages. Don’t forget too, if you get bonuses make sure you elect to get witholding out of them if you have the option. That’s pure gravy and if you can push as much of that to retirement as possible you won’t “feel” it like you do contributing 25% of your paycheck.

    Mortgage and kids don’t really play into it other than purely cash availability. Conceptually a mortgage would be break-even relative to paying rent… or at least close enough to it to be moot in the situation. Yep, kids will cost you so that reduces money on hand for contributions but as others have pointed out, it’s a sacrifice to be made. It’s always the trade… my retirement fund or my latte habit…

  • Bryan says:

    I find it disappointing but I am not at all surprised.

    If you don’t have kids, you should be 25% of your income up to $16,500 into your 401k ($16,500 is 25% of $66k so that is the sweet spot if you will), period. It will never get easier. If you are married without kids, you should both be maxing out. If you don’t have access to a 401k, max out the IRAs. Having kids isn’t much of an excuse. To me, the 401k is just like the mortgage. It is a bill I have to pay every month. No excuses. My wife and I both work and we have two kids in daycare. It took us a couple years to get our lifestyle in line with saving like we should but we made it this year. We both maxed out our 401k ($16,500 if possible but no more than 25% of the income). One day I hope to max out the 401k AND 529 plans for the kids ($6,000/year for each kid = $12,000 deductible in KS). Right now I am doing $25/month for each kid so a looooong way to go but it is a goal to either find extra income and/or cut cost. We made it with the 401k so we are confident with more work we can eventually make it with the 529.

    • Paul says:


      I agree with the concept of your goal, but would point out that since you can only rebalance your 529 once per YEAR that you would be better off opening a separate brokerage account (treat it as non-withdrawable until college) and just putting the money in it instead of a 529. Since this money is after tax, there is no limit and you will not incur a penalty if there is any extra, or if your kids decide not to go to college / get full scholarships / or some other unexpected outcome. FYI, when it comes to financial aid, money in a 529 is still counted as the parents’ savings, so there is no advantage (FA-wise) to having it in a 529 versus a plain vanilla savings account (but do NOT put it in the child’s name, if you do it will have a much larger impact on their eligibility). In that vein, when it comes time for college, if you haven’t already paid off the mortgage on your home (although it sounds like you probably will) you can take that account and put it against the principal where it won’t be counted against you as savings (but do this as your child enters twelfth grade, you have to report your savings as of the beginning of the year they graduate).

      Always keep in mind that all these options are tax shelters. There is no reason you can’t just have savings that you consider sacrosanct of any amount you feel you can afford. We as Americans have destroyed our nation’s future by becoming a nation of spenders rather than savers. Back when we saved 8% or more on average of our income the economy grew an average of 5% per year. Now we’re lucky to get 3% growth in a good year because we save next to nothing. I wish everyone would think like most of the people posting here do!

  • Rob says:

    Just chiming in on a fact: OptionsHouse has the lowest stock per-trade cost at $2.99 (or is it $2.95?) per trade. I do not use them any longer because I found the user interface of their site for too widget-heavy for a casual investor. It takes a long time to load. Still, the reason to switch is barrel-scraping prices per trade.

  • Chuck says:

    I agree with all this information, but I think some have forgotten that getting out of debt should be first. Paying interest is the worst and will eat up your investment money. Kill the depts and then put that money into retirement planning.

  • Beth says:

    I think those that say you can’t max out are making excuses, unless you really don’t earn much. I am only 28 years old but have been maxing out since 2006. At that point I was only making about $45K a year. I do have a large mortgage now, but my husband and I put down 20% for our house and continue to max out both 401ks. I totally agree with Bryan’s comment that it is just a bill like any other–there won’t be a time that you magically have extra money to put into retirement, you just make it a priority and do it. Most of us in my generation won’t be able to retire unless they get smart about money now–no one else is going to do it for you.

  • Ken says:

    I was maxing out my 401k when I made $65K/yr, but I was young, single, and living in a relatively cheap part of the country.

    Now I live in an expensive big city, I pay a mortgage, and I’m no longer single, so while I do make $100K/yr now, it’s actually harder for me to max out, but I still do. It’s a priority to me if I want to retire at a reasonable age and have the sort of retirement income that I want to have.

  • Jon says:

    Make every effort to do it this year. Out of sight is truly out of mind. Once you make the committment you WILL learn to live on what you take home. Also, don’t forget that most tax payers will recieve a 2% tax reduction in the Social Security tax in 2011. Add that 2% to your current contribution and you’ll never notice. You’ll soon find yourself looking for other ways to save more with other available investment vehicles. Don’t fret over the limit not increasing. If you have additional cash to save open the Roth and Traditional IRA’s. If you max out there then you wouldn’t be on this site looking for financial advise…you’d be giving it.

  • Snookman says:

    What we all should be upset over is this: We are stuck in our employer’s 401k plan with it’s limited investment choices unless and until we quit, get fired, or incur some major life event. I’ve written my congressman to pass legislation to allow workers to once per year roll over some or all of their 401 balance into a self-directed rollover IRA. I have thousands of mutual fund and other choices with Etrade, with my 401k plan I’m limited to about 2 dozen, that I didn’t choose.

    We are losing way more money by not having total control over our own money!

  • Julie says:


    Are you saying you are being forced to invest in a 401k by your employer? My company doesn’t make us contribute–we can opt-out.

  • Emmo says:

    Well I guess I’m the exception cuz I max out and Im a single mom, with a mortgage and car payment. But I make sure it comes out before I ever see it and have done this for years, so I’m just so used to thinking I make a heck of a lot less than I really do. Now that means that usually the few days before payday I have bout 2 bucks in my account, but as long as I cant touch it I cant spend it!

  • Snookman says:

    Hi Julie,
    Participation in my company’s 401 plan is optional of course. However, the money you invest is yours, but the investment choices provided to you are theirs. Who are they to decide what’s the best funds for us? We don’t get to decide what funds/fund families are offered but we are subject to their poor performance, high fees, and of course the cost to administer the plan.

    There is talk of a self-directed 401k plan. Why does it have to be sponsored by our employers, because they cut our paychecks? Ridiculous! It’s our money! And if they offer a match, great, let them decide how the match can be invested, but not our contribution.

    Vanguard/Fidelity/Etrade and others have the knowledge to administer 401k plans, so let us choose who administers/ is the custodian for our 401k, and get our employers out of the equation.

  • Julie says:

    I assume it is because it makes it easier to manage for the employer.

    This is why a lot of people put in only enough in their 401k to get their employer’s match, and the rest of their retirement savings in an IRA.

    Life is not far, so if you need to invest more and you want the tax benefits of a 401k/IRA then you have to play by the government’s/your company’s rules.

    Would I like to be able to invest my 401k in the vanguard fund which is currently not available to me as a choice? Sure. But then again, I’d also like to get paid more and have more time off.

    I can find other solutions to those issues, obviously. But so can you (to yours).

    Also, I do get to pick my investment options in my 401k, they are more limited than an IRA would be, but I still have plenty of ways to customize my risk exposure.

    • Scott says:

      Smart and pretty, nice combination.

      I wish the gov would let us invest our own social security.

      • alex says:

        While it might be nice to be able to invest S.S. as we wish, I fear that it would cause more problems then it would solve.

        For one, do you really trust most people to invest wisely? Could be a recipe for social unrest if just a small fraction of people piss away their retirement accounts to bad investments.

        It’s also worth noting that S.S. isn’t a retirement plan. It works well to supplement income for many families when they become either disabled or retired, and it works well in that regard. That’s not to say that there aren’t structural issues with S.S., because there are. For example, I can expect to receive about 70-75% of current benefits (adjusted for inflation) when I retire due to issues ranging from how the program gets funded to demographic issues facing our nation. Does that suck? Yes. Can I live with those cuts? Yes.

  • Rob says:

    I have been maxing out for years. I have a mortgage, kids and the normal monthly bills but have managed to stay out of debt, except for the mortgage and when I need to buy a new car. My cars are all over ten years old now but still running good so hopefully will get a few more years out of them. The trick is to not to spend too much on stuff we ultimately don’t really need – helps keep down the clutter around the house as well. I guess in the end it is a matter of priorities. The max should be raised as it appears to me the CPI is bogus. The cost of living has increased for food, gas, utilities and the other staples of daily living. Decreases include the value of ones home and other assetts which in the end decrease the overall value so I don’t see the so called decrease in the CPI being real. My two cents.

  • Jen says:

    I would like to max out, but my company said I’m consider a high income earner (I make just a little over $100K), so I can’t contribute the max $16500, I can only put in half of that amount because other people in my company don’t contribute a lot. It’s weird and I’ve never heard of it before.

  • Allan says:

    Hi Jen

    I came across your post and saw this on the internet. Sucks but read for your self.

    Highly-Compensated Employees
    Some employees are subjected to a second contribution limit. If you’re classified as a “Highly Compensated” employee, then you may be subjected to contribution limits based on your employer’s overall 401k participation rates. If your salary is above $110,000 in 2010 or 2011, then you may need to contact your employer to see if any additional limits apply to you.

    For a highly-compensated employee, the total of your elective deferrals and contributions made for you by your employer under a section 401k plan or SARSEP can be no more than 125% of the average deferral percentage (ADP) of all eligible non-highly compensated employees in a calendar year.

    If the total contributed to the plan is in excess of the amount allowed under the ADP test, then any excess contributions must be either distributed back to the employee or re-characterized as after-tax employee contributions. For example, the contribution can be distributed to an employee, and then contributed by the employee right back into the plan.

    Highly-compensated employees must report these excess 401k contributions as taxable income on IRS Form 1040, line 7. An employee should receive a Form 1099-R in any year in which an excess contribution is distributed to them.

  • ysette9 says:

    I’m bummed that the contribution limits didn’t increase. Fairly recently I have been able to contribute up to the maximum but this coincided with my marriage which made us both ineligible to contribute to an IRA so in the end our retirement savings has gone down due to the limits. I know there are always other savings vehicles but I fail to understand the point of limits on retirement savings anyway. I’m especially interested in socking away as much as I can now while I don’t have the obligation of kids. I know that I may not be in this fortunate of a savings position in the future and I’d like to be able to take advantage of it to the maximum extent possible while it lasts.

  • EL Dorado says:

    Dammit,let us contribute up to $25K to our 401Ks once we get to age 50. It’s a hard sacrifice as it is but for those of us with only 20 years left to retire, every dollar extra we can tuck away is essential! Who do we need to complain to in Congress to get this limit increased? Why isn’t there more of a fuss over it? Is everyone in the US just a sheep or wuss when it comes to demand change for the better?!

  • Texas CFP says:

    Just a thought, but after you pay off your debts, and you maximize your 401(k) matching, then ask yourself: Do I have the discipline to put away the money myself? If so, then it may well be that you should start another “bucket” with money you have already paid taxes on.

    1) You get to pick the investment, not a universe of 20 funds, but thousands of other options, stocks, mutuals, etf’s, bonds, and more.

    2) You’ll have an alternative place to draw funds at retirement. I can’t predict the future, but I think taxes will be higher in thirty years. Wouldn’t a Roth be a good hedge against having to pay 50% income tax on your 401(k) balance?

    3) Also not outside the realm of possibility — Uncle Sam decides that 401(k) accounts should be “invested for you” by the government and you’ll be “guaranteed” a return of your money at retirement. I really like the idea of NOT betting the retirement farm on a 401(k) alone.

    Talk to someone who doesn’t have a vested interest in your participation. You may find that the reason they encourage you is because your enrollment raises the average deferral percentage (ADP) of the company, and allows the highly compensated employees a chance to save more than if only a few of the rank and file paprticipate.

  • Joe says:

    I have regularly put money in my 401k for over 20 years as it is a great idea to save for the future. However, I don’t see many commenting on the government’s plans to take over these accounts (and waste them away like they always do).

    In September of 2010, the Department of Labor met to discuss just that…taking away your hard earned 401k accounts and then doling them back out to you.

    In light of this, what are everyone’s thoughts of the US government hijacking your 401k account and determining how/if you get your funds? It sure would be nice to see more information on their plans to take our accounts in order to reduce the deficit they foisted upon us. Any plans for articles on this topic? Why would anyone invest in an account that may be taken away? Comments?

  • cemsguy says:

    Don’t forget to consider a high deducible insurance plan with your employer and the accompanying HSA. You can sock away almost $6K of pretax money that you can use for your health care now and in the future. This money is always yours and has other benefits such as being inheritable by your heirs.

    • Kevin says:


      I was thinking the exact same thing making my way down this thread. I love my HSA account and it is a huge money saver for me especially since my wife and I are starting a family very early in our lives, compared to the U.S. norm. Another benefit is, if you decide you need your funds, you will pay regular tax dollars to withdraw it.

      Which begs the question… Has anyone thought about as your kids being an investment for the future? As long as they are educated well enough, can cheaply get through an in-state university, and land a good job, support for worst case scenario (you run out of retirement money) is not too far around the corner. And depending on the size of your family(we’re Catholic), this can be done very cheaply by each child. I know I will be at a point to look out for my parents if that time comes. Let me know what you guys think.

  • Rachel says:

    Keep in mind, the government isn’t actually placing limits on how much you can save for retirement – just how much you can save tax-free.

    Of course nobody likes paying taxes, but for the standard of living that we enjoy in the United States we pay a financial price.

  • Chris says:

    Good point, Rachel. But would be great to have the extra tax savings too!!

  • Pamela says:

    It is possible. I am a single woman in my mid-40’s and I am doing it. Heck yeah, I’d love to have an additional $1400 (minus taxes) per month but I forgoe instant gratification now for a secure future. I don’t earn over $100k per year either.

    I only seriously started saving for retirement about 6 years ago. Every year since then I have increased my 401k contribution by the percentage of my salary raise, which is usually 3%. It’s been a gradual thing so I haven’t really felt the loss of income but, I effectively haven’t had a raise in 6 years either. I’ve cut expenses in other areas.

    Re-financed my home and lowered the payments by $300, paid off my car which saves $335 per month. No premium cable, no iPhone, no iPad, and no debt. It is VERY possible to do and keeping my eye on being able to retire at age 55 is what keeps me going.

  • Claude says:

    Now that we’ve all paid our taxes for last year, I suggest everyone consider this for your 2011 financial situation. The real value of the dollar has lost about 20% in the past two years, and with commodities going through the roof and gasoline over twice what it was on Inauguration Day 2009, I can’t see any reason to not minimize your taxable income if you can afford it.

    The problem with the limit is simple: it’s a “one size fits all” attitude that does not take into account different cost of living factors. I’m 61 and working, and I can tell you I live in a high cost of living city where my rent for my apartment is $2,000 a month, today’s gas for my car is $4.17, my car and renter’s insurance goes up every year because of the demographics, and I’m capped at the same rate as my cousin in Cottonport, Louisiana?

    The necessity of saving is also simple. As many have written, Social Security won’t pay the bills, and of the 74 million Baby Boomers, want to guess how many have nothing – no assets, no housing, no way to pay for food, medicine, heat, clothing, etc.? How is the Government going to pay for these people with nothing? That’s right – take it out of Social Security and Medicare. So save or spend your post-70 years in line.

    Retire at 55? If you’re not a union-protected civil servant, think about working until 70 or you’re physically unable. Hope all that money you saved isn’t worth 40% of what it was worth when you earned it. And good luck, everyone.

    • alex says:

      Claude, you can always retire in Cottonport, LA. I’m sure the higher wages you’re making now will set you up handsomely for retirement down there. Now if your cousin is making and saving more than you while living in Cottonport, there may be a problem.

  • Steve says:

    This is all great information, but what if I am looking for investments that can pay me back before retirement age? Are dividend paying stocks the way to go?

  • Chris says:

    I would just like to point out to the the younger savers in the group that up to $10,000 can be taken out of a Roth IRA for the purpose of a first time home purchase. Instead of trying to decide between saving for a home or retirement, you can do both!

    • Robby says:

      Ah! Good to know! On the cusp of completing training for a career change after living at or below the poverty level for almost 15 years and am looking to max out both Roth IRA as well as 401k while paying back student loans. Will eventually “settle down”, but knowing a down payment from Roth IRA + VA benefit + first-time home buyer could be a game winner further on down the road. Thank you sir.

      • Ken says:

        You’re actually able to take out ALL of your principal without penalty or taxes, at any time.

        That means, if you have contributed $10,000 and your account is now $15,000, you can take out $10K to use however you want, but you can’t touch the remaining $5K without meeting certain qualifications.

        Something to consider.

  • craig says:

    When I started working in my current job, I decided to start investing in 401K to take full advantage of my employers match. That number was nowhere near the maximum contribution level, but it was my starting point. Each year when I received a raise, I maintained my standard of living and applied the entire raise towards my 401K. By maintaining that approach, I finally reached the maximum contribution without impacting my lifestyle. Saving for retirement is not a short time process…start now!

  • SA says:

    Making less than $100k and contributing to the max on a 401k is great. I just can’t see how we would do that at all, though. It wouldn’t mean cutting out Starbucks (which we already do not consume). My husband makes 45k and we have three small children. 16.5k per year going to some place else wouldn’t be tough. It just wouldn’t work. We do manage to put away 10% in his 401k and with company match, it’s 22.5%. Thank goodness for that or else we’d be even further behind. Those saying that people are just making excuses haven’t walked in everyone else’s shoes.

  • Jarod Dingo says:

    I’m 39 and will max out my 401K this year at $16500. Any other pre-tax or tax deductible options?

  • GG - 41 says:

    I’m 41 years old, and I make pretty good living. However,I started saving in my 401K 20 years ago. Not much at first, the minimum to get a company match (I think it was 6% and I got $0.50 match at the time). Back then I was making $10.25 an hour or roughly $21,350 yearly.

    I graduated from college in when I was 28 and of course I increased my contributions. For the past 10 out of 13 years I contributed the maximum amount. The last three years I had to back off because I took a significant pay cut. However, I’ve been increasing the amount this last year (12% of my pay and the company I work for matching 150% for the first 6% of my salary).

    So where am I going with all this? Back when I was 21 years old, I got in the habit of saving (Paying myself first). Now that I’m 41 years old I have saved just shy of $500,000. The rule I followed was simple, every year I got a raise I increased my 401K contribution by half of what my raise was. After I graduated from college and got a higher paying job it was easy to max-out.

    To this date I tell everyone to contribute at least 6% and to raise that amount each time they get a raise. Very few people listen.

  • oscar says:

    Would someone explain why my 401K balance, after it dipped for the last several months, did not come back to the same amount as before the dip? In fact the stock marked as of today 7/22/11, is higher than it was before the dip, but my 401K balance shows approximately $8-10K less.


    Obviously stupid

  • Chris says:

    Oscar, It just depends on what you invested it in. There are online quizzes that you can take that can give you a recommendation on how to invest depending on what your risk tolerance is, etc. My money is invested very aggressively (largely international) and tends to be more volatile than the domestic market.

  • Doubtful says:

    I work at my husbands business and the accountant just told me that I can no longer contribute to the 401k plan this year because it is top heavy and I am considered an executive because I am married to the owner. Is this true?

    • Ken says:

      There are limitations on how much a “Highly Compensated Employee” can contribute, where HCE is defined by earning over a certain dollar amount and being in the top 20% of employees, or by > 5% ownership of the company.

      The limitations for HCEs are based on retirement benefits of the non-HCEs at the company – they’re not allowed to be too skewed towards the HCEs, to protect the little guys. I don’t know the specifics, but you could certainly be hitting a limit there.

  • Hefe says:

    So what happens if you go over the $16,500 (max) per year? Do you get penalized? Does your company stop you from being able to contribute over the $16,500?

    • Ken says:

      Your 401K program through your company will generally prevent you from accidentally going over the max, but if you contribute to two different 401Ks in the same year, they don’t know about each other and it’s up to you to stay under the limit.

      If you do go over, you do an excess withdrawal of the overage and any earnings attributable to the excess (there’s a procedure to calculate that, it’s a pain in the butt, but it doesn’t penalize you). If you correct it before April 15 of the following year, you’re fine. If you don’t correct it in time, I think you are penalized in the form of paying taxes twice on the excess (once in the year it went in, once in the year it comes out).

  • Brandy says:

    Do you know when will the 2012 401k limit be announced?

  • Roger says:

    I am assuming everyone who is discussing maxing out their 401k has paid off all their high interest debt. Where investment returns increase and decrease, averaging anywhere from 8-11%, paying off debt provides a consistent rate of return- interest avoided is income saved. Even paying off a 6% mortgage will give you an 8% return accounting for the tax incentive if you are in a combined 33% tax bracket. Real estate is an investment, too, but is highly regionalized and susceptible to speculation and boom-bust cycles.
    Bottom line- pay off high-interest debt before worrying about maxing out 401k.


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