401 K Limits

Frequently Asked Questions

1. QUESTION:
   What are the 2008 contribution limits for solo 401 (k) s?
   What is the employee deferral limit?

   What is the employer contribution limit?

   Do you combine the two maximums?

   • ANSWER:
     Read about 401(k) http://taxipay.blogspot.com/2008/08/elective-deferrals-401k-plans.html

2. QUESTION:
   401(k) contribution limits for 2007?
   I see that the contribution limits for a 401(k) in 2007 is ,500. However, my employer matches [FAQ-QUESTION].50 per dollar on the first 6%. Do company contributions count toward the ,500 limit or are they over-and-above this limit?

   • ANSWER:
     No. Only your contributions count.

3. QUESTION:
   IRA and 401(k) Contribution Limits?
   Hello -

   I work and my wife, who formerly worked, stays at home. I have a 401(k), and I make the maximum contributions evey year. My wife used to have a 401(k), which she rolled over to an IRA when she stopped working. My questions is, even though we contribute to my 401(k), can we also contribute to my wife’s IRA? Thank you in advance for your answer.

   • ANSWER:

4. QUESTION:
   I’m leaving a co. with a 401(k) and going to a co. with no 401(k). Can I make deductible IRA contributions?
   The new company has no 401(k). I left the old company in May after making 4 months worth of 401(k) contributions. Can I make deductible IRA contributions from my income at the new company since they have no 401(k)? Income limits are not an issue — I would be normally be eligible for a full contribution.

   • ANSWER:
     You can open a conventional IRA, yes. You don’t make the contributions “at the new company”, you make them independently. Consider a Roth instead, though. It could be a better deal in the long run.

5. QUESTION:
   401(k) and traditional IRA contribution limits?
   For the past 4 years I was self-employed and contributed 00 annually to a traditional IRA (before-tax). Now I work at a company that has a 401(k) plan and matches 3% (vested over 5 years). So my questions are, can I contribute to BOTH? And what are the limits? My w-2 will have the “ret” box checked on it, so I might get hit with an over-contribution if I contribute too much. But right now I am looking to save for retirement and this is a good year for me to stick as much away as possible.

   • ANSWER:
     Yes you can contribute to both. Limits are ,000.00 for the IRA and ,500.00 for the 401(k) for people up to age 49 in 2009. If 50 yrs old or older, limits are ,000.00 for the IRA and ,500.00 for 401(k). Good luck

6. QUESTION:
   what are the tax penalties for going over the 401-k non taxable with holding limits?

   I worked for two different companies and contributed to their 401-k plans. In the first one I contributed about 00. I just saw in my last statement from my current employer I have contributed ,250. I am over 50 and wanted to contribute the max of ,500. Even though I stopped my contributions when I realized I was over the ammount. They said it may take another pay check with a deduction before it will stop. How can I get the overage back out of the plan and into my payrole. I must not be the only one this happens to so what does the IRS do if I am over? Thanks

   • ANSWER:
     Actually, it depends on if your 401(k) Plan allows for after-tax contributions or not. Contact your Plan administrator to be sure.

     If so, then it gets added to your individual account. However, be aware that you might be subject to the same rules with penalties for early distributions, etc. (Again, contact your Plan Sponsor for more details. Each Plan is different.)

     If not, then they should be refunding the money back to you, probably through payroll.

     There should be no penalties to you.

7. QUESTION:
   Can an individual open a 401(k) account?
   I would like to invest in a 401(k) but I don’t like what funds are offered through my company as a part of the 401(k) investment portfolio. Can I choose to invest my money into different funds? I don’t want to use IRA because the annual contribution is very limited as compared with the 401(k) contribution limits

   • ANSWER:
     In your situation, I don’t think you can open your own.

     What you can do is contact your HR department and request that they expand the list of available funds. If they are working through an advisor, ask them to forward your request on to the advisor.

     I’ve successfully gotten our company’s 401k plan to add some funds by being specific about why adding them would be good for employees. (Not that they did everything I asked, but they did do something in the right direction.)

     In the meantime, you are better off investing in your company’s 401k plan if they offer any matching funds. If they don’t, you may want to invest in a Roth IRA first (if you qualify) and then save more by investing whatever you can in the company 401k. If nothing else, either one day the company will improve the 401k, or you’ll be in a position to roll over the 401k into an IRA of your choice.

8. QUESTION:
   For 2006 what is the new 401(K) limit?

   • ANSWER:
     ,000 – per the source below.

9. QUESTION:
   IRS 401 k Contribution Limit – Does it Include Employer Contributions??
   Does the IRS 401 k contribution limit of ,500 include the contributions made by ones employer ?

   • ANSWER:
     No, the 2007 limit of ,500 is for employee contributions only. The combined limit for employer and employee for 2007 is ,000.

10. QUESTION:
    More than one employer and contribution limit to 401(K) plan.?
    If I work for more than one employer in a calendar year, is the 401(k) contribution limit still the same at 000? Or can I contribute more than that?

    • ANSWER:
      no, annual limit is the same. have to be careful not to go over it. it does get reported (box 13 o14 i think) on your w-2, so if you go over you’ll get hit with having to take out, and penalties and stuff

11. QUESTION:
    Alternative to 401(k)?
    I am looking for saving plan similar to a 401(k) or Roth 401(k).

    Here are my details:
    * My employer doesn’t offer a 401(k).
    * I am single and make over 0k

    Are there any plans that let me contribute anything near the .5k 401(k) limit?

    • ANSWER:

12. QUESTION:
    Employer match after 401(k) max?
    I’ve hit the max 401(k) limit for 2008 (,500 for me); I had planned out my contributions early in the year to contribute all year round, but an unexpected bonus through a wrench into that planning. For the first paycheck after the maximization, I continued to receive the employer match. Now, the employer is thinking that they shouldn’t be contributing a match, since technically I’ve stopped contributing.

    I’ve read elsewhere that some folks continue to receive their employer match after maximizing their 401(k), but I’d love to here an actual reason for it, as I really don’t want to get the employer in trouble, as it is a family business and the office person is a family relative of mine. If there is credible information out there I can show her, then all I have to do is show it to her and I’ll get my employer matches coming back.

    Thanks for all the help ahead of time!
    I will add that the match designated is the first 3% is dollar for dollar, then the 4%-5% is fifty cents on the dollar, for an effective match of 4% of my paycheck. That said, I put away 67% of each paycheck, up until November, when I maxed the 401(k) contribution. The only thing I’m trying to determine is if I am eligible for employer matching contributions for the last couple paychecks this year, even though I’ve maxed my contributions. I think so, since the employer obviously hasn’t put in 4% of my salary yet.

    • ANSWER:

13. QUESTION:
    How does the 60-day limit work for rolling over a 401(k) into an IRA after a job loss?
    In other words, I’m wondering what exactly I have to do before the 60 days is up.

    Do I just have to have to get the withdrawal form delivered to the company my 401(k) is with by the 60 days? Or does the transfer have to be completely done by the time the 60 days is up? Or what?

    Thanks!

    • ANSWER:
      The rollover has to be complete within 60 days. If you receive a check they probably took out money for taxes. You have to make up that amount.

14. QUESTION:
    does a 401(K) rollover count against IRA contribution limits?

    • ANSWER:
      No, rollovers do not count against the annual IRA contribution limit, which in 2006 is ,000 or ,500 if you are over age 50.

15. QUESTION:
    Is it true that it’s illegal to simotaneously invest in an IRA and a 401(k)?
    I was talking investing with a co-worker (I’m not very well-versed on the subject) and he said that I cannot invest in a 401(K) and an IRA at the same time. I don’t understand how that may be true. I don’t even contribute anywhere near the annual limit to my 401(K), so I don’t see how opening up an IRA will be a bad thing.

    • ANSWER:
      Actually it isn’t illegal but it can be tricky. If you are talking a 401(k) vs a traditional IRA then you are only allowed a certain portion of tax deffered contributions. Currently around ,000 per year. But if you are considering a Roth IRA then you are allow ,000 in your 401(k) tax deffered and 00 in your Roth IRA aftertax dollars.
      Some people in here may trump up the Roth IRA, personally I don’t contribute to one be cause I want to maximize my tax deduction. But if you are so inclined, I would at least put as much % into you 401(k) that takes FULL advantage of your employers match.
      I can give you better advise if you need/want it. Feel free to e-mail.

16. QUESTION:
    I am eligible for 401(k), 403(b) and also 457(b) Plans, is there an overall limit to contributions to 3 plans?
    I work for a State University which has Optional Retirement Plan(401(k)) for which I can contribute 8% and my employer matches 7% of my salary, we also have 403(b) with ,500 limit and also state offers 457(b) with 15,500 limit. I was wondering if there is an overall limit to contributions. Please advise. Thank you.

    • ANSWER:
      contributions to a 403(b) and a 401(k) are subject to what is called the 402(g) limit which for 2008 is ,500. Contributions to a 457 plan are NOT subject to this limit but are subject to their own limits because they are considered employer contributions. So bottom line is you have a ,000 limit here unless the individual plan has a lower limit.

17. QUESTION:
    401(k) matching limit and rate?
    What is the typical maximum 401(k) contribution that employers will match? And at what rate do they typically match?

    • ANSWER:
      While these numbers vary widely with employers, typically they match up your contributions of up to 6% of your gross salary. They typically match 50 cents on your dollar contribution./

18. QUESTION:
    Is there a legal limit for the amount of time a former employer can take to process a 401(k) rollover?
    My former employer/custodian of my 401(k) is taking a long time to process my request to rollover my 401(k). I want to know if there is any legal recourse i can threaten to make this move more quickly?

    • ANSWER:
      I don’t believe there is a statute of time requiring plan administrators to process a Direct Rollover. I have seen Direct Rollovers take from 2 weeks to over a year. The most being 7 years! There are so many factors that go into it. The best case scenario is that they are just behind on processing and the worst case being the company is in receivership. I would just continue to contact them on the status.

19. QUESTION:
    I would like to contribute to a program like a 401(k) after maxing out my contributions?
    I am limited by my company from adding contributions to my 401(k). I would like to put more in to something similar–is there something comparable that I can use? I use my regular investment account but would like something with tax incentives.

    • ANSWER:
      If you fall under the income limits you can look into a Roth IRA, after tax dollars grow tax-free,I believe the annual limit is about 00. Though there are no-tax savings now, in the long run the savings in tax are tremendous.

      For immediate tax-savings there are funds that are very tax friendly and of course municipal bonds however the rates of return are smaller than a comparable taxable account so it;s only beneficial for those in higher tax brackets.

20. QUESTION:
    What is the contribution deadline for a 401(k)?
    I would like to make a pre-tax contribution to my 401(k) for tax year 2010. I found conflicting information on whether it’s possible to make a pre-tax contribution up to the 2010 tax filing deadline. Is the deadline April 18, 2011 or December 31, 2010? The employer is organized as a limited liability partnership, if that is relevant. Thanks!

    • ANSWER:
      Deadline was 12/31. For an IRA you could contribute up to 4/18, but not for a 401K.

21. QUESTION:
    Can I contribute to an IRA even if I pay into a 401-K?
    I have a 401-k but I would like to invest in an IRA, maybe a Roth, can I do both and if so, are their limits?

    • ANSWER:
      Yes, you can have a 401k and an IRA, but there are limitations. For example, in some cases, contributions to a traditional IRA are tax deductible, but if you are covered by another employee savings plan (i.e. 401k), and your annual income is over a certain amount, you can not deduct IRA contributions. I think the current limit on IRA contributions is either ,000 or ,000 a year. It used to be ,000 and then they raised it to ,000 in 2002, and then it was raised again in 2006 to ,000. I am not sure what it is now.

22. QUESTION:
    401 K savings/ING savings account and how tax filing works when you contribute money into them!?
    I am starting to add funds into my 401 K plan and I also just opened an ING Savings Account to contribute into as well. What is the minimum balance of money I need to claim these contributions on my taxes next year? How much money can you claim off of these two plans….(Limit)…? Thanks

    • ANSWER:
      The limit on 401K contributions change each year and depend on age. For example, the 2007 limit for those in their 30′s was ,500.

      Contributions to a 401K are automatically subtracted from your income by your employer. The amount on your W-2 is the difference between your gross pay and the 401K contributions, so you get the tax savings without claiming anything.

      If the ING account is an IRA, the contributions limit change each year and depends on age. For example, the 2007 limit for those in their 30′s was ,000. You can claim any contributions to an IRA; there is no minimum. Even if you just contribute , you can claim that.

23. QUESTION:
    What is the time limit for Rolling Over a 401(k) or 403(b) to an IRA?
    My husband is a teacher, and recently changed school districts — moving from a private school to a public school. He has a 403(b) plan with his old employer. I’m considering rolling it over into an IRA. Is there a time limit on making this decision? (1 or 2 years from now if I decide to roll it over into an IRA, is it too late?)
    Follow-up question: when does the clock start ticking for the 90-days? From the last paycheck? Or the last contribution to the 403(b)? In this case — the last contribution to the 403(b) was about 2 months before the last paycheck from the job.

    • ANSWER:
      The time limit is 60 days if he doesn’t do a direct rollover. This type of rollover subjects him to the 20% mandatory withholding tax. Also, if you don’t rollover the money into an IRA within this time, you would also be subject to 10% (Sec 72(t)) early withdrawal penalty.

      Doing a direct rollover allows him to avoid this tax. He would also be able to roll his 403(b) plan into another qualified plan rather than an IRA if the public school offers one (it would more than likely be a 457 plan).

      If you want to contact me about any other questions, feel free to do so.

24. QUESTION:
    Can an employer make a ‘lump sum’ to an employee’s 401(k) plan?
    My employer is looking to modify its retirement plan to include a large “lump sum” bonus to the employee when they leave the company. We’re looking for ways to avoid a large tax liability on this final “bonus.” Would the employer be allowed to put this money into a 401(k) style plan, even if it is above the 500 annual limit? Is there a better way to pay out this “end of career bonus” to limit taxes?

    • ANSWER:

25. QUESTION:
    Maxed out 401(k), maxed out IRA, what next?
    Hello, I have about ,000 a year to invest for retirement. With the ,500 limit on the 401(k) and the ,000 limit for the IRA, I still have money left.

    What should I do with it?
    I am 26 and I make 6,000 a year.

    • ANSWER:
      Tax Free Municipal Bonds could be a good alternative and you earn the interest tax free (federal) and possibly state depending on where you live.

      Retirement savings do not only have to be formal like IRAs.

      A solid mutual fund that grows annually is a wise investment and unlike tax deferred instruments, you can withdraw the funds at anytime you need it and not pay penalties, and you wont have to pay tax when you withdraw it at retirement time. This is excellent strategy because if you have everything tied up in tax deferred, then you’ll have a large tax liability with little to no deductions when you retire (kids gone, no mortgage, etc), so having a non-tax deferred source of income/funds provides a balanced supply of resources.

      Good Luck
      ED

26. QUESTION:
    Is there a 401(k) calculator online that will allow me to use employer contributions?
    What I mean exactly is, all the calculator I’ve found online allow for a % that the employer matches. What I am looking for is a specific dollar amount one.

    Like at most the employer matches 00.

    I want to know this because that is the cut off limit.

    • ANSWER:
      Having a portion of your paycheck directly deposited into a 401(k) before you even see it can make it psychologically easier to save. Many retirement savers use a 401(k) primarily because it makes it easy to save each month (19 percent), because they were automatically signed up for the plan (12 percent), and because an employer encourages it (2 percent). However, only a small portion of retirement savers say they contribute an amount automatically set by an employer (4 percent) or recommended by a financial adviser (2 percent).

27. QUESTION:
    401(k) Benefits at Target Corporation?
    Hi everyone! I recently was hired by Target Corp. in Minnesota. I scanned through their website and was wondering if anyone knows if there is an age limit for starting a 401(k) through them. I have read that it can be 18 at places and 21 at others and some don’t have limits.
    I am turning 18 on Thursday (and coincidentally have my orientation the same night). Also, I am scheduled to work approximately 20-30 hours minimum with long-term employment.
    If there are any other FAQ answers, I would love to hear about those as well.
    Thanks for your help!
    ~Chris
    I’m basically asking if there is an age minimum for having a 401 (k) through target.
    Some other competitors offer it to all ages while some make one wait until he/she is 21.

    • ANSWER:
      You need to ask about this during your orientation. Not all employees are eligible for a 401k benefit. Some companies exclude part timers. Some make you wait 6 months to 1 year.

      Ask for your particular store/state, age and employment status.

28. QUESTION:
    What are my retirement combination limits?
    My company states that the IRS limits the dollar amount an employee can contribute on a combined standard before-tax and Roth 401(k) basis. For calendar year 2008, the limit is ,500. I believe that means that both 401k and Roth 401k contributions through my employer are limited to ,500 for the year.

    Can I contribute the maximum ,500 and the open an IRA and contribute the 00 maxium there too? The would be a total of ,500 per year.

    • ANSWER:
      It primarily depends on how much you make per year, and your maritial status. My wife and I contribute the max to our 401k plans (15500 for her, and 20500 for me – I’m 50 this year). Because of income limits, we are not eligible for a traditional IRA (at least not eligible to deduct contributions for tax purposes), but we both contribute the max (5000 her, 6000 me) to a ROTH IRA.

      See the link for limits and how they may affect you.

29. 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 “.

30. 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.

31. QUESTION:
    401(k) vs. NQDC vs. Roth IRA?
    I am currently maxed out on my 401(k) and putting additional money into a NQDC plan. My employer has changed up my options to increase the max contribution on my 401(k) plus added a Roth IRA.

    Since I am currently split between my 401(k) contributions and NQDC due to the limits and the limits have been removed, what are the benefits of maybe putting all of my existing contributiosn into my 401(k). Also, should I take into consideration the Roth IRA option and maybe move my NQDC contribution to a Roth IRA contribution?

    I’m trying to figure out what gives me the most bang for my buck, so to speak. Any insight would be appreciated.

    Thanks!
    Thanks Carol, an additional note, I am in a high tax bracket, so deferring the taxes until I retire/am in a lower tax bracket would make sense.

    • ANSWER:
      All of this depends on your tax situation. If you put the money into the 401(k) you will not pay state/federal taxes on those funds and any gains you make on them until they are withdrawn. The theory is, of course, that you won’t take out the money until you’ve retired and are in a lower tax bracket. If your current tax bracket is low already, and you expect it to be significantly higher when you take out the funds, then go with the Roth IRA (note: if you pay any administrative fees for the Roth, that changes everything — stick with the 401(k)).

32. QUESTION:
    Questions about 401 k plan.?
    I have limited access to my 401 k plan, until I receive my pin number in the mail.
    However, I have a question regarding early withdrawal. I read that some companies allow you to early withdrawal and some don’t. How do I know if mine allows me to? I am still with the employer that is linked to my 401 k. So I know that may not be a good thing.
    I am in need of with drawling money for medical bills. (I know its not a great idea) But I am dire need.
    Does anyone have any information that may be helpful…??.
    Thank you.
    Thank you for your replies. I was able to contact ING. Luckly I am able to borrow and pay back within 5 year without any tax or fee. Thank you all so much for your help.

    • ANSWER:
      You find out by reading the plan provisions for your employer’s specific plan, which you were given when you enrolled. Or contact the plan administrator to ask.

      A LOAN from your account may be another option. Again, it depends on the specific plan.

33. QUESTION:
    How much can one contribute additionally if he has already participated his employer 401(k)?
    If one has already participated his employer 401(k) plan ( 12b of W-2), how much can he contribute to the IRA by opening a new IRA account in a bank? Can he contribute a full 00 additionally or the combined employer 401(k) and new IRA contribution cannot exceed the limits 0f 00 in 2009?
    So, one still can contribute ,000 in 2009 by opening an IRA account in a bank even if his wage has already been reduced by participate his employer 401(k). Is it correct?

    • ANSWER:

34. QUESTION:
    Can you contribute to a Non Roth IRA if your employer offers a 401(k)?
    I want to know if can deduct your IRA from your taxes even if you are eligible for a 401k. I don’t think you can because conceivably you could contribute the max on both the IRA and 401K which would allow you to contribute pretax more than the limits.

    • ANSWER:
      So, you can max out both, but you might not want to do that. There’s no legal problem with it, but if you contribute to a 401k, your ability to get the tax break on your IRA phases out around the 50k-60k range for single taxpayers and 75k-85k for married.

      Thus, if you have a 401k and are above the limit, it’s recommended to go for the Roth IRA instead since you get the tax breaks later.

35. QUESTION:
    Is it time for term limits in the Federal legislative branch?
    Here is my proposition:
    1. A strict two year limited _single_ term for ALL members of the congress and senate, with further provision that neither they nor any of their family may hold public office again.
    2. Former members of congress and senate may not hold any lobbying type of position at any time.
    3. All members of congress and senate must live WITH their constituents and with only the average income of those constituents, paying all taxes,fees, rents, fuel bills, etc from that net income.
    4. The ‘golden retirement’ plan would be ended and congressmen/senators would have to depend on their 401(k) plans for retirement.
    5. EVERYONE who is not a convicted felon and who is a legal citizen of the U.S.A. must serve one term in either congress or senate.
    6. The president would be a hired individual with a minimum of 15 years experience as CEO of a _large, successful_ corporation.
    Steve C. Awesome use of the language, dude.
    rmagedon and ConstantReader.
    True, the thieves would never accede to such a sane proposal. I move that we vote them ALL out and don’t put anyone back in place.

    • ANSWER:
      Surely you jest! Utopian ideas never happen in this imperfect world. Congress and the Senate, our law makers, will never enact your propositions.

36. QUESTION:
    If i contributed more than 15k limit due to change in employment what happens?
    I changed job during the middle of the year and due to some miscaculation i exceeded the 15 k limit on 401 k contribution. what happens to the excess contribution ?

    • ANSWER:
      I’m not positive about this but I THINK what will happen is that your excess contribution will just become taxed. Then in the future when you take withdrawals you won’t pay tax on that excess amount. You may be able to call one or both of the 401K administators and have the excess refunded.

37. QUESTION:
    Should I get a 401(k)?
    I just turned 24 and it’s time to enroll in benefits again at work. Among other things, they are offering a 401(k). The 401(k) would be through Wachovia (not yet Wells Fargo), and the company I work for is a privately-held limited liability company, which is financially stable. I plan on staying with this company long-term. Would it be good to get a 401(k) now?

    • ANSWER:
      Everyone here is correct – YES! The earlier you start, the better off you’ll be. Your long-term goal should be to contribute 15% of your salary (the annual maximum contribution is ,500). If you can’t swing that right now, just contribute whatever you can, and be sure that you increase your percentage every time you get a raise.

      If your company matches your contributions, you should AT LEAST contribute enough to get the maximum company match. That is free money, and you don’t want to leave any of that on the table!

      I hope that helps – good luck!

38. QUESTION:
    IRA deduction if spouse has 401(k)?
    I have contributed to my company’s 401(k) in the amount of ,000. Can my wife still deduct IRA contributions for the year? Is there a limit to IRA deductions based on adjusted gross income?

    • ANSWER:
      Whether you will be able to deduct your wife’s IRA contributions depends on your Modified AGI (“MAGI”).

      MAGI = AGI (ignoring IRA deduction) + student loan interest deduction + tuition/fees deduction + other misc. provisions (see worksheet 1-1, pg 15, pub 590)

      If the MAGI is < 0k, you get the full deduction (00, but 00 if > 50 years old)

      If 150k < MAGI < 160k, you get a partial deduction (use worksheet 1-2 on pg 17)

      If MAGI > 0k, you get no deduction

39. QUESTION:
    Suppose that the market for loanable funds is in equilibrium.?
    What would happen in the market for loanable funds, other things the same, if the Congress and President increased the maximum contribution limits to 401(k) and 403(b) tax-deferred retirement accounts?

    a. the interest rate and quantity of loanable funds would increase
    b. the interest rate and quantity of loanable funds would decrease.
    c. the interest rate would increase and the quantity of loanable funds would decrease.
    d. the interest rate would decrease and the quantity of loanable funds would increase.

    • ANSWER:
      D. If the president increased the maximum contribution limits, there would be in effect, more saving. An increase in saving, shows an increase in the supply of loanable funds, shifting the supply curve to the right. This increase in supply of LF’s (shift of supply curve), decreases the interest rate.

      So…Interest Rate Decreases, the Qty. of LF’s Increase by Supply shift to the right.

40. QUESTION:
    The maximum age permitted for employee participation in a 401(k) plan is? (31)?
    The maximum age permitted for employee participation in a 401(k) plan is

    a. 55

    b. 59-1/2

    c. 65

    d. A maximum age limit for participation is not permitted.

    • ANSWER:
      Oh- Ido not know. I do know that you have to 21. I didn’t think that there was a maximum age, because when they ask how you want you contributions they ask if you want an agressive one or not.

41. QUESTION:
    Assuming I am under the income limit for Roth IRA, can I contribute to both a Roth 401 (k) and a Roth IRA?

    • ANSWER:
      You limit per year is 000 in 401K, regardless of roth or regular. That is the limit before employer match.

      You can also put K in an IRA, regardless of roth or traditional.

      Pick one 401K option, and one IRA option.
      I think you can do a mix too.

      But also, there is no benefit to investing in traditional IRA’s if you have a certain income ( I think 50K) and have access to 401K. In those times, you should always pick roth IRA.

      This is my understanding. Currently I invest 15K in a traditional 401K and 4K in a Roth.

42. QUESTION:
    401k help, please! What percentage to choose?
    I’m 26 years old and will be enrolling in my 401k with my employer (Wells Fargo), but I am so confused.
    BEFORE-TAX ACCOUNT ( limit )0.00%
    ROTH 401(k) ( limit )0.00%

    (Those are the percentages I need to choose).

    • ANSWER:
      What are the terms that go along with each account – what is the company match at the different percentages and what are the vesting terms? Is it a one or the other decision or can you do both? Do you have to make this decision right now or can you change your mind later? Simple answer: if you can afford it, put the maximum percentage matched by the employer to both accounts.

      Search online for 401k and Roth 401k for the basics of each account. Roth you pay the taxes before you invest and 401k is invested at the full amount but taxes will be taken out when you withdraw from the account (i.e. less of your check goes toward retirement, but you’ll have to pay for it later). That’s not all so please google.

      Company matching and the vesting schedule are important too and you should consider both. Company matching is when they match a certain percentage of what you contribute. Say they’ll match 50% of the first 3% of income you pay, you can put in 1, 2 or 3% and they’ll put in half what you did toward the account. But what you walk away with is really dependent on the vesting schedule and how long you work there. You always keep what you invested (plus or minus returns on the portfolio). If you’re 100% vested when you’re hired, then everything the company put in is yours too. But most companies have a schedule to encourage people to stay for a while. Say you have to work there 3 years before you’re fully vested, the account will show all the money you invested and the money the company matched. But if you quit before 3 years, some of that money will go back to the company.

      Figure out what you can afford to put toward retirement each paycheck, figure out what flexibility you have in making this decision (ask HR if you can only choose one and if you can change your mind later), get the info on company matching and vesting schedule and do some research online to understand the different types of accounts.

43. QUESTION:
    401(k) contribution clarification?
    Currently, the cut off for contributions to your Roth 401(k) is ,500. Does this include the employer match?

    For example, say your employer is going to match ,500 to your contribution. Also assume that you are going to contribute the full ,500 per year. In this case, in order to hold to the above contribution limit rule, would you have to keep your contribution to ,000 so that you do not go over once your employer kicks in their ,500 share. …..or can you put the full ,500 in and then let your employer’s match push you over to ,000.

    Thanks for any help.

    • ANSWER:
      It only applies to your contributions. You can put in 15,500, plus the employer match.

44. QUESTION:
    Can The Government take your 401 K ?
    If I owe the Government 0,000 in unpaid student loans, will they take my 401 K when I retire 20 years from now to satisfy the amount I owe ? Is there a limit to what they can take, like 15 % or will they take all of it or none of it ? I know I will still owe the 0,000 when I retire because I owe 00 a month just in interest on that and I cant even pay the interest part let alone the principle. Thanks in advance for any insight.

    • ANSWER:
      Yes the government can garnish all of it but for more recent times they can also garnish your wages, freeze checking accounts. You don’t want to not pay this money back you will regret it now and in the long run.

45. QUESTION:
    Advice on taking out a loan on my 401(k)?
    Should I take out a loan against my 401(k)? Here’s my situation, I’ve owned my own home about a year and a half, and I’m a month behind on payments. I have a credit card with a 0 limit that’s maxed out, and I’m behind on 2 other loans (both with less than 0 left to pay). Because of my medical condition, I also have a few medical bills I still need to pay off as well. My car needs tires, brakes, and a tune up. I don’t have enough money to take care of my utilities this month,and if that isn’t enough, I had to borrow 00 a week ago from a friend when my refrigerator went out. I don’t have the option of taking out a loan at my bank because of my credit scores. I want to know if it would be a wise choice to take out a loan from my 401(k) to pay off all the debt I have? I’m only wanting to borrow ,500. I’m 30 years old, have worked at my current job for the federal government for 9 years, I also have a second job working nights a few nights a week to help out, I’m single with no dependents. Please let me know what you think. Serious answers only. Thanks

    • ANSWER:
      Sure….use the 401K. You can use the “negative cash flow” option to get a personal loan. The payments will be deducted right from your pay, and the interest is low–you’ll never have to actually make a
      payment.

      When you borrow from your 401K you are borrowing from yourself–and paying yourself back on an automated schedule. This is a good idea in your situation.

      Get that debt cleaned up and cut up the credit cards and pay back your friend.

46. QUESTION:
    Questions about Trad IRA and 401(k) plans?
    I am a single female, age 56 and have some questions about my Trad IRA and my 401(k) plan at my job. First, I’ve been working at this job for only 4 years (make about 000) and haven’t accumulated much (around -13,000). Every pay period (26 pay periods per year), I have 0 deducted to go into this account. How much more can I have deducted? At my age, is there a limit I can have taken from my paycheck? We also have a profit sharing plan but the firm contributes to that. Next, I have a Trad IRA that is about ,000. I don’t know the difference between traditional IRA and Roth IRA, can someone explain in “layman’s terms.” At my age and status, which is the better and/or preferred one? The way I look at it, I’ll be working until I’m in my mid-60s and am trying to achieve a good retirement. Thank you to anyone who can explain this to me more thoroughly.

    • ANSWER:
      You qualify for “catch-up” withholding, so no doubt you COULD have way more taken out than you can afford to have taken out. 401Ks are employer-sanctioned retirement savings plans and thus you can’t take a Tax Deduction for any IRA contributions you make. The 401K deductions are usually pre-tax, but the Roth IRA is post-tax contributions, so you won’t be taxed again when you withdraw the money, after you retire, the way you will be for 401K and IRA contributions. Hopefully you will be able to continue working until that age, but you should try to deduct as much as you POSSIBLY can afford, now. The 401K is probably preferable, particularly if your employer “matches” even a part of your contributions, With only 8-9 years left, though, you are unlikely to “achieve a good retirement” but you need to do whatever you can, since SS will not go far enough to keep you going, let alone afford you a “nice” retirement.

47. QUESTION:
    I have two jobs, and am wondering if I can contribute the maximum (,500) to each 401(k)? Thanks in advance!
    Or does the limit apply to the sum of the contributions to each plan?

    • ANSWER:
      One job or five, you can only contribute the maximum amount of 15,500.
      Although, if you had your own business, you could do a SEP IRA which would allow you to contribute up to 44k for 07 and 45k for 08.
      A SEP IRA is easy to set up if you have a business, but if you have employees, you must offer the plan to all qualified employees.
      Go to www.irs.gov for info on SEP IRA’s. All you have to do is fill out a form and open an account with a plan administrator.

48. QUESTION:
    401 k question?
    so i started a 401K when i was 21….i keep putting money into it and it grows. pretty simple, so 40 years down the road when i’m old and retired, do i just spend the money in it like i would a checking account? how does the accessability to the funds work? are there age limits before you can use it? can you only have so much in a certain time?

    • ANSWER:
      Well, starting at 21 gives you options. But the rules will have changed by the time you hit 59 1/2 which is when you typically can begin taking money from an IRA without taking a distribution.

      However, you can take money from a 401k if you quit after age 55. So early retirement could be in your future IF you hit it hard and hit it early. If you quit BEFORE you’re age 55 or your money is in an IRA and you haven’t turned age 59 1/2 yet you can still access it without a penalty if you spread the payments out over your life expectancy.

      Basically the rules are designed to allow people to retire…not get at their money early to pay down debt or pay for kids college.

      You don’t HAVE to start taking it until age 70 1/2 but even then you can defer payment if you’re still employed. I know you can’t see that as being the case but file it away so that you can tell your dad, uncle, friend, or whomever. People who own more than 5% of the company that has the 401k don’t get to defer the distribution…just regulary employees.

      You don’t spend it like a checking account. The money is in a tax deferred account. You can start taking installment distributions where your employer will withdraw a certain amount each month (year) and send you a check. You deposit that into your checkign account and go your merry way. But, many employers dont’ want the hassle and only allow lump sums…if your employer is like that then you’ll have to roll your money into an IRA and the same principal applies.

      You can have as much as you’d like…but you need it to last for as long as you live regardless of the market returns and inflation. Magic figure is 4% distribution each year. So if you want 40k a year, you’ll need 1 million dollars in the account. Anything more than that and a few down years will start depleting the principal so far that you can’t recover and you’ll have to start drawing less.

49. QUESTION:
    Should I convert my nondeductible IRA to a Roth when income limits are gone in 2010?
    I’ve always made too much to contribute to a ROTH, so I max out my 401(k) but only marginally put money in my nondeductible IRA. Should I max out the IRA this year so that I can convert it to a ROTH next year, knowing I have to pay taxes on the conversion?

    • ANSWER:

50. QUESTION:
    TAX WRITE OFFS AND 401 K?
    If one is in sales and anticipates writing off, 15-20k(doesnt include 401k) for mileage,meals,work from home,.., is their a more of a limit to what one can put into a tax free 401k? or is it the same?

    • ANSWER:
      If you are an employee and receiving a W-2 form the expenses you mentioned are employee business expenses shown as an itemized deduction. Since this is not an offset against your wages/commissions you would be able to fund and deduct a percentage of your earnings up to the limit of ,500.
      If your are self employed,filed schedule C, these expenses would reduce your earnings and you would be able to contribute a percentage of the net income for a 401K. The limit is still ,500.