2010 401k Limits

Frequently Asked Questions

1. QUESTION:
   401K and Roth IRA contribution limits 2010 ?
   Can i contribute 00 in Roth-IRA and ,500 in 401K in the same year 2010. or should the total of IRA + 401K not exceed 16,500.
   I am a little confused about total limits if I am contributing to both.

   i am 26 years old and i make ,000 annually.

   thanks

   • ANSWER:
     Roth IRA max is 5k
     401k max is 16,500.00.

     Total is 21,500.00.

     If you are 50 or over. which you are not yet. You could add extra 1k for Roth IRA, 5k extra to 401k.

     Total is 27,500.00 for a person is 50 or over.

2. QUESTION:
   can I make a maximum contribution to my 401K to reduce my tax liability for 2010 now?
   I just lost my job, and they paid me a lump sum severance pay, I would like to Max out on 401K limit for 2010 to reduce tax for 2010
   Thanks for your answer

   • ANSWER:
     If you are no longer employed, you won’t be able to add to that employer’s 401k plan. Roll the 401k over to an IRA and add the max contribution for an IRA.

3. QUESTION:
   Can I convert a non deductible IRA that has after tax 401K funds into a Roth in 2010 when income limits expire?

   • ANSWER:
     Dear Bobby: Great question, not many people have thought that far ahead. Why not? Look at IRS Pub 17 page 124 and it makes clear the procedure to follow when you convert a nondeductible IRA to a Roth. Obviously the 0,000 figure is a hurdle now for you and in 2010 that hurdle will be removed. Make sure to retain all documentation related to the origin of the IRA and the tax paid status on the funds. Remember you can keep that Roth going even after you reach age 70 1/2.

     This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provide. Click on my profile to read more.
     Errol Quinn Enrolled Agent Master Tax Advisor

4. QUESTION:
   When is the limit to contribute to contribute to 401K: 12/31/2010 or another date?
   I never contributed to my 401K before and I would like to start contributing.
   I know the limit for 2010 is ,500 but I would like to know when the limit is to contribute
   this amount for the year 2010. Is it the end of current year 12/31/2010 or a different date such as when I have to file my income taxes (4/15/2011) ?

   Thank you

   • ANSWER:
     12/31/2010 – contributions can only be made in the form of salary deferrals on your part.

     The 4/15 deadline applies to IRAs – not 401(k) plans.

5. QUESTION:
   I have been putting in 500 a year into my 401k. How much total could I contribute into Roth IRA besides?
   traditional 401k limit of 500 for 2009 & 2010.

   It’s confusing. Some websites say 00 in addition to the 500, some say 500 includes the 00. Could you clarify please. Thank you.

   • ANSWER:
     Your fine with the 401K. ,500 is the max. It is not an IRA or a ROTH IRA.

     In addition, You can put in 00 total combined under age 50, into ROTH and traditional IRA. And if you are 50+ then the limit is 00 combined. But for my money, forget the traditional, and just use the ROTH because you will never be taxed on the earnings and withdrawals.

6. QUESTION:
   ira and 401k limits and tax benefits?
   My daughter has started working in 2010 and her monthly salary is about 20000 US $, she has contributed 16500 for 401k through her Company and made a deposit of 5000 in an ira account without having made any purchase of securities. if she makes a purchase of securities for 5000 $, will she be entitled to tax exemption in addition to her 401k. if not can she withdraw the money from ira account without being penalized, as such only deposit has been made and no investment.

   • ANSWER:

7. QUESTION:
   I’m a single filer who has contributed ,000 to a Roth IRA and ,500 to an employer sponsored 401k in 2010.?
   I’m a single filer who has contributed ,000 to a Roth IRA and ,500 to an employer sponsored 401k in 2010. My salary will be 45K in 2010. Does anybody know if I’ve surpassed any contribution limits? Also, can I rollover that ,500 into a rollover IRA when I leave my present employer this calendar year? If so, can I roll it over into a Roth IRA with exceeding any limits?
   Thanks!

   • ANSWER:
     You’re fine. I made the exact same contributions.

     You can roll your 401k into a Traditional IRA without paying taxes. If you roll it into a Roth IRA, you will have pay ordinary income taxes on the balance as of the date of the roll over.

     Rollovers do not count towards annual contribution limits.

8. QUESTION:
   401K contribution limit?
   I have a question regarding the 401K contribution limit.
   For this year 2010 i know that the contribution limit is ,500. I wanted to know if this limit is employee only contribution limit or (employee + employer) contribution limit.

   Means can I myself contribute ,500 regardless of my employer match. SO if my employer is matching my contribution by 6 % match, my employer contributes $ 990 and so totally my overall 401K contribution will be 0 + 500 = $ 17490. Will this be ok or should our combined contribution be less than ,500.
   Thanks

   • ANSWER:
     YOUR contribution limit (withheld from your paycheck) limit is ,500

     the companies match is totally irrelevant to that limit

9. QUESTION:
   What is the employees (under 50) maximum 401k contributions?
   An employer offers maximum 3% of the employees 6% of matching 401k contributions. What are the total 401k contributions in 2010 for an employee under 50? Is it ,500 or more? In addition, can an employee open an additional bank IRA account if s/he has already made the 401k contribution limit by participation of the employer’s 401k?
   If one has already contributed ,500 to his traditional 401k in 2010, can he open a different Roth account to contribute additional ,500?

   • ANSWER:

10. QUESTION:
    Should I roll over my 401K to a Roth IRA this year?
    I have recently changed companies and am contemplating whether to roll over my 401K balance to a ROTH IRA. I am currently only 23 years old and have about 8,000 dollars vested in my 401K. I currently meet the income limits and would be able to do this, but is it a good idea this year? I know in 2010 the income limit disappears and there is a possibility of delaying the taxes over a couple of years.

    Is it a better idea to move it into a ROTH now or should I wait until 2010? Or should I jsut forego the ROTH and transfer it to a traditional IRA?
    Annual Salary is about 70k so the 8k wont bump me into an additional tax bracket .. So I should do it all this year then correct?

    • ANSWER:
      You first have to roll it over into a Rollover IRA, then you can put it towards a Roth IRA after you pay the taxes owed.

11. QUESTION:
    401k – IRA – Roth IRA – how to pay less taxes?
    We are not eligible to contribute to Roth IRA (due to income), but would like to build this tax free vehicle up for our future. Recently i left my previous company & would to take the 401K into an IRA and then to Roth IRA in 2010 since there are no limits (at least now). However, ideally I would like to take tax liability in 2009 – is that possible or does it only happen in 2010? Currently the $$s are in old company 401K. Thanks!

    • ANSWER:
      Yea, that damn 0k limit is annoying. I see no way to take tax liability in 2009 other than to take a withdrawal which will also be subject to the additional 10% tax for early withdrawal. As you know, in 2010, taxpayers with modified adjusted gross income of more than 0,000 will be allowed to convert a traditional IRA to a Roth IRA. This change applies for one year only as far as I know. The taxes due can be spread over two years which helps. You take 1/2 on your 2010 tax return and 1/2 on your 2011 return.

12. QUESTION:
    what’s is the maximum annual contribution an employer can give to its employee (401k, pensions, annuity)?
    I know that for 2010 the maximum amount of money an employee can contribute to his/her 401k is ,500, but is there a limit as to what the employer can contribute in an employee’s 401k and any other pre-tax contributions like pension funds, annuities..etc.

    • ANSWER:

13. QUESTION:
    Can I open an Roth IRA and roll over my 401K?
    I’d like to open a Roth IRA with an initial investment of ,000 before the 2010 year is up (money I saved while working). I already have a 401K with my employer, but I am being laid off December 23rd. Will I still be able to rollover the 401K (I assume it doesn’t factor into the contribution limit) this year? And if I wait until next year to rollover, will I still be able to add an additional ,000 for 2011? My 401K has a little over ,000.

    If I go another route.. can I just open a Roth IRA at the same time I rollover my 401K? And if so, can I also add the additional ,000 I saved from working this year?

    Lastly, I will be receiving a severance package. Do I have to wait until after I receive this to rollover my 401K? Since you can’t close/rollover an account until technically unemployed (although my “termination date” is Dec 27).

    Thanks!
    I’m not worried about money while I’m unemployed. I will have more than enough to get me by for a year of unemployment (or longer). I am a very frugal saver. But thank you.

    • ANSWER:
      You should be able to do both. The rollover and the ROTH are independent of each other. If opening a ROTH, then your income for the year has to be greater than the amount you will be opening the ROTH with. You may have to check for income restrictions where if you made over a certain amount, you may be limited to the amount for the ROTH in 2010. You cannot contribute in 2011 if you do not have taxable compensation. See http://www.irs.gov/publications/p590/index.html

      Call up Vanguard, Fidelity, or your favorite fund family or discount broker and ask for an IRA rollover kit. That would explain a lot. Start your rollover after you receive your severence and are no longer employed to make sure that no more is being deposited in your 401K and that it can be rollover as whole. Rollover directly from administrator to administrator to prevent any tax withholding.

14. QUESTION:
    What is considered income for the 2010 Federal tax credit?
    I make less than the federal limit of 5K in order to qualify for the 2010 “first time buyer” house tax credit. To purchase the home, I withdrew K (netted K) from my 401K for the downpayment. I just received my 401K statement which shows the K as income. If it is income, I am now about K OVER the 5K federal limit. Surely there’s a way to not count the K (really only K) as income. Help!

    • ANSWER:
      It IS taxable income – just not earned income.

15. QUESTION:
    Fast 401k Rollover options?
    My employer recently went bankrupt. I got this letter at the end of the year stating that my 401k plan would change to Merrill Lynch. They let me know that I can take a lump sum (with the standard 10% early withdrawl fee) or just leave it in there. I left it in there. Yesterday, I noticed a letter from Merrill Lynch welcoming me to their new plan and gave specific details that I was never told. It was loaded with fee upon fee:
    * annual fee
    * quarterly fee (since my account is below k)
    *even a significant termination fee if I decide to leave

    My previous 401k had NO FEES. None of the fees were described before the funds rolled over. Now if I don’t roll it over today, the termination fee goes up another (increase in Feb 2010). How can I quickly rollover the funds? Can I just take a lump sum (to get the transfer started) and re-invest in a Brokerage IRA or would I be limited to the k/year limit unless I rollover direct from one bank to another? I don’t think I can get a new IRA account started in just a day.

    • ANSWER:
      It’s too late to roll it over in one day. But do NOT take a direct distribution. The termination fee is trivial. What you should have done (and should do now) is to do a direct custodian-to-custodian rollover to an IRA. There is NO advantage in leaving it in the 401(k) plan.

16. QUESTION:
    Which investment elections should I choose for my 401k?
    Advice from a PCA preferred, but not limited to!!!!!!

    Here’s my many choices………

    WF ADVTG CASH INV MONEY MKT-SV
    WF ADVTG TOTAL RETURN BOND-ADM
    WF ADVTG GROWTH BALANCED-ADM
    TROWE PRICE VALUE
    WF ADVANTAGE INDEX – ADMIN
    NEUBERGER BERMAN SOCIAL RESPO
    JANUS RESEARCH
    LORD ABBETT MID CAP VALUE
    FIDELITY ADVISER MID CAP
    AMERICAN CENT SMALL CAP VALUE
    BARON SMALL CAP
    JULIUS BAER INTL EQUITY A
    WF ADVTG SPECIALIZED TECH-A
    WF ADV DOW JONES TARGET TODAY
    WF ADVTG DOW JONES TRGT 2010
    WF ADVTG DOW JONES TRGT 2020
    WF ADVTG DOW JONES TRGT 2030
    WF ADVTG DOW JONES TRGT 2040
    WF ADV DOW JONES TARGET 2050

    • ANSWER:
      You might have many choices but many are somewhat poor. T Rowe Price Value is not bad so maybe 20-25% there.
      Julius Bear Intl Equity is very good so maybe 20-25% there.
      25% in the money market.
      25% in WF advantage index, not a great choice but not bad either.

17. QUESTION:
    Which investment elections should I choose for my 401k?
    Advice from a PCA preferred, but not limited to!!!!!!

    Here’s my many choices………

    WF ADVTG CASH INV MONEY MKT-SV
    WF ADVTG TOTAL RETURN BOND-ADM
    WF ADVTG GROWTH BALANCED-ADM
    TROWE PRICE VALUE
    WF ADVANTAGE INDEX – ADMIN
    NEUBERGER BERMAN SOCIAL RESPO
    JANUS RESEARCH
    LORD ABBETT MID CAP VALUE
    FIDELITY ADVISER MID CAP
    AMERICAN CENT SMALL CAP VALUE
    BARON SMALL CAP
    JULIUS BAER INTL EQUITY A
    WF ADVTG SPECIALIZED TECH-A
    WF ADV DOW JONES TARGET TODAY
    WF ADVTG DOW JONES TRGT 2010
    WF ADVTG DOW JONES TRGT 2020
    WF ADVTG DOW JONES TRGT 2030
    WF ADVTG DOW JONES TRGT 2040
    WF ADV DOW JONES TARGET 2050

    • ANSWER:
      Get the cheapest index funds from that list, and make sure you diversify into mega, large, mid, and small cap indices, as well as a first-world foreign index and an emerging market index. The advice for dividend funds is good, but i personally think you want to go for high dividend cos. like shipping companies, since that is an income, not growth, strategy, so it’s like putting the money to work rather than letting it compound. Also consider stashing a small amount in a hard currency fund, just in case. That’s not to be taken as investment advice, you must educate yourself on this.

18. QUESTION:
    Roth IRA – Married filing jointly – How much can we contribute?
    Hi,

    I got married in 2010. My wife didn’t work in 2010 and my 2010 income is around 0k. I’m thinking about filing our 2010 taxes jointly but have questions about how much we can contribute.
    1) Is the total limit to contribute to a Roth IRA is ,000 for us? ,000 for me and ,000 for her?
    2) Do I create two separate Roth IRA accounts? One for me and one for her?
    3) As my employer didn’t allow me to enroll in their 401k plan in 2010 (new job), will I be able to contribute k to traditional IRA (k to my traditional IRA account and k to my wife’s traditional IRA account) in addition to k to our combined Roth IRA accounts?

    Thank you for your help!

    • ANSWER:
      Based on your earned income of 100k:

      1} yes, you may contribute up to 5K (limit for under age 50) to each of your Roth IRAs;
      2) yes, they’re separate; and
      3) no, a taxpayer’s total annual IRA contribution limit is – regardless of which one, or how many, you choose – 100% of earned income, of 5k, whichever is less.

      Hope that helps.

      PLEASE VOTE to avoid a TIE. On behalf of all of your responders, who take the time and effort to help questioners in this free Yahoo! community, THANK YOU in advance for taking the time to choose your “Best” Answer. We really appreciate it.

      DISCLAIMER: While the information in this response was obtained from sources believed to be reliable, its accuracy and completeness cannot be guaranteed. The opinion voiced in this answer is for general information only and it shall not be construed as tax, legal, or investment advice for any individual, nor shall it be considered a solicitation for business. Questioners are urged to consult with their professional advisers before making any decisions regarding their finances.

      Bradley Mann, CFP®, EA, BCE, CFS, AAMS
      Certified Financial Planner™ Practitioner
      Enrolled Agent | Admitted to Practice before the IRS
      Board Certified in Estate Planning

19. QUESTION:
    How should I allocate my 401(k)?
    I have only had profit sharing plans in the past. Our company just downsized and switched over to a 401(k). My options are limited in the 401k. Background: 31 years old, single, homeowner. My employer is matching up to 4% so I am contributing 5% to get the max. I am pretty conservative, I’d like to take some risk but not too much. Here are my options…
    Share price as of 03/01/2010
    Fidelity Advisor Balanced T FAIGX .59

    Fidelity Advisor Dividend Growth T FDGTX .52

    Fidelity Advisor Equity Growth T FAEGX .75

    Fidelity Advisor Equity Income T FEIRX.84

    Fidelity Advisor Freedom 2005 T FFTVX .30

    Fidelity Advisor Freedom 2010 T FCFTX .52

    Fidelity Advisor Freedom 2015 T FFVTX .47

    Fidelity Advisor Freedom 2020 T FDTFX .81

    Fidelity Advisor Freedom 2025 T FTTWX .36

    Fidelity Advisor Freedom 2030 T FTFEX .78

    Fidelity Advisor Freedom 2035 T FTTHX .13

    Fidelity Advisor Freedom 2040 T FTFFX .83

    Fidelity Advisor Freedom 2045 T FFFTX .39

    Fidelity Advisor Freedom 2050 T FFFQX .22

    Fidelity Advisor Freedom Income T FTAFX .21

    Fidelity Advisor Government Income T FVITX .55

    Fidelity Advisor Growth Opportunities T FAGOX .96

    Fidelity Advisor Intermediate Bond T FTBRX .84

    Fidelity Advisor Mid Cap Ii T FITIX .28

    Fidelity Advisor Overseas T FAERX .87

    Fidelity Advisor Small Cap T FSCTX .36

    Fidelity Advisor Strategic Income T FSIAX .16

    Fidelity Prime Fund; Daily Money Class FDAXX .00

    • ANSWER:
      You should be able to pick more than one.
      I’d go 1/3 with the dividend growth
      1/3 with the Freedom 2035
      1/3 with the Small Cap T

      You’ll be well diversified, you’ll have 2/3 in very conservative investments and 1/3 in something slightly more risky, looking for more returns.
      And as you approach retirement the Freedom 2035 reallocates into cash/bonds.

20. QUESTION:
    Need help allocating my 401 (k)?
    How should I allocate my 401(k)?
    I have only had profit sharing plans in the past. Our company just downsized and switched over to a 401(k). My options are limited in the 401k. Background: 31 years old, single, homeowner. My employer is matching up to 4% so I am contributing 5% to get the max. I am pretty conservative, I’d like to take some risk but not too much. Here are my options…
    Share price as of 03/01/2010

    Fidelity Advisor Balanced T FAIGX .59

    Fidelity Advisor Dividend Growth T FDGTX .52

    Fidelity Advisor Equity Growth T FAEGX .75

    Fidelity Advisor Equity Income T FEIRX .84

    Fidelity Advisor Freedom 2005 T FFTVX .30

    Fidelity Advisor Freedom 2010 T FCFTX .52

    Fidelity Advisor Freedom 2015 T FFVTX .47

    Fidelity Advisor Freedom 2020 T FDTFX .81

    Fidelity Advisor Freedom 2025 T FTTWX .36

    Fidelity Advisor Freedom 2030 T FTFEX .78

    Fidelity Advisor Freedom 2035 T FTTHX .13

    Fidelity Advisor Freedom 2040 T FTFFX .83

    Fidelity Advisor Freedom 2045 T FFFTX .39

    Fidelity Advisor Freedom 2050 T FFFQX .22

    Fidelity Advisor Freedom Income T FTAFX .21

    Fidelity Advisor Government Income T FVITX .55

    Fidelity Advisor Growth Opportunities T FAGOX .96

    Fidelity Advisor Intermediate Bond T FTBRX .84

    Fidelity Advisor Mid Cap Ii T FITIX .28

    Fidelity Advisor Overseas T FAERX .87

    Fidelity Advisor Small Cap T FSCTX .36

    Fidelity Advisor Strategic Income T FSIAX .16

    Fidelity Prime Fund; Daily Money Class FDAXX .00

    • ANSWER:
      ..Thinking ” conservative” is great…but don’t give up all chances for some real growth….
      The Fredom plans are fairly conservative to start with, and they get more conservative as you go along….so go for the max” 2050″… another great way to compound earnings is with dividends…so also get some money into ” dividend growth”….. Go with 40 % in each of those and go for some quicker ( next five years) gains with 10% ” overseas”…and 10 % in either “small” or “mid-cap”….take advantage of the fact that you have money managers to be picking companies/ countries for you…. give it time and compare your gains down the road…you’ll be much happier with the 10% funds….but still a ” conservative investor “.

21. QUESTION:
    Can I open and contribute to Roth IRA for 2011?
    I make about 0,000 and self employed for 2010. I’ll be salaried starting in 2011 making about the same.

    I need to roll over my 401K account that I currently have. Only about ,000 in it.

    I’ll be able to contribute to my 401A (,000) and 403B (,000) for 2011.

    Question is, can I still open a Roth IRA for ,000 and roll over my current 401K in 2011?

    Does the income limit exclusion apply still for 2011 for opening a Roth IRA?

    • ANSWER:
      The rollover is a separate issue from new contributions. Yes, you can roll over your 401(k) into an IRA.

      There are still income limits for Roth IRA contributions – they depend on whether you are single or married.

22. QUESTION:
    More than just savings or CDs?
    I want to know what to do with my extra money that will give me more than just 5-6% in a savings account or another CD.

    I am currently…
    - Maxing out my 401k (,500/yr)
    - Fully funding a Roth IRA when I fall under the income limit (4k/yr)
    - Fully funding a non-deductible Traditional IRA to roll over to a Roth in 2010 when I’m over the income limit (4k/yr)
    - Have 6+ months of emergency living expenses in an online savings account earning 4.5%
    - Have multiple CDs earning around 5%
    - Have some money in a brokerage account to buy stocks for fun and speculative picks (meaning I wouldn’t care if I lost it all)
    - Investing in 529 plans for my niece and nephew.
    - Giving >10% of my income to charities

    I’m single and don’t have a lot of expenses and I want to do more with my money than just have it sit in savings. I don’t have enough to purchase property, though (not that I would in this market right now).

    Any advice?
    Sorry, I actually already own a home… mortgage at 5.5%… I meant I don’t want to get a second property…

    • ANSWER:
      Consider using your brokerage account to invest in an index fund. An S&P 500 index fund is a type of mutual fund that attempts to match the returns of the S&P 500 by investing in the companies that make up the index. Over time the average annual return on the S&P 500 has been about 10%. You’ll remain diversified because the fund invests in hundreds of companies and because the fund has a low turnover rate the fees are quite low. Also, this type of a fund outperforms about 85% of actively managed mutual funds!

      On example of this kind of fund is the Vanguard 500 Index Fund. Symbol: VFINX

      By the way, you’re doing a really great job of managing your finances right now! Congrats!

23. QUESTION:
    Traditional IRA to Roth Conversion Tax implications?
    My wife and I both have traditional IRAs that were funded entirely with post-tax dollars due to our income being over the limit for deposit of pre-tax dollars. We also each have 401k and 403b accounts which were funded with pre-tax dollars. We are planning to convert the entirety of our traditional IRAs to Roth IRAs due to the 2010 income exemption. The current value of our Traditional IRAs is just under what we initially put into the accounts. Am I correct to believe that there should be no taxes owed on this conversion? I understand that if I were convert a 403b from a previous employer into an IRA, it would then have to be factored in to the tax calculation, but because the account is still a 403b, it should not figure into my tax calculation. Therefore, our traditional IRAs can be converted to Roth without any taxes owed. Let me know if I’m thinking about this correctly.
    Thanks,
    Nick

    • ANSWER:

24. QUESTION:
    I have been putting in 500 a year into my 401k. How much total could I contribute into Roth IRA besides?
    I have been putting in 500 a year into my 401k. How much total could I contribute into Roth IRA besides?
    traditional 401k limit of 500 for 2009 & 2010.

    It’s confusing. Some websites say 00 in addition to the 500, some say 500 includes the 00. Could you clarify please. Thank you.

    • ANSWER:
      You can put 00 into a Roth before April 15, 2010 for tax year 2009. If you are over 50, then you can contribute an extra 00, under the catch-up provision, for a total of 00. However, your adjusted gross income (AGI) must be less than 5,000 if you are single or 6,000 if you are married. If your AGI is higher than that, then phaseouts begin, where you cannot contribute as much. If that is the case then email me and I will help you to pinpoint the exact amount.

      The 16,500 that went into your 401K has nothing to do with your entitlement to contribute to your Roth IRA. Your AGI does though. Those income limits above are for a Roth only. Traditional IRA AGI limits are different and are ,000 and ,000 if you are single or married, respectively, and need the deduction.

25. QUESTION:
    I have been putting in 500 a year into my 401k. How much total could I contribute into Roth IRA besides?
    I have been putting in 500 a year into my 401k. How much total could I contribute into Roth IRA besides?
    traditional 401k limit of 500 for 2009 & 2010.

    It’s confusing. Some websites say 00 in addition to the 500, some say 500 includes the 00. Could you clarify please. Thank you.

    • ANSWER:
      Yes, you can put the 00 in to a Roth IRA also.

      I do exactly that. I max out my 401k AND I put k in to a Roth.