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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75383  
Subject: Re: Too much in the 401K? Date: 5/20/2011 5:40 PM
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The answer to your question on the max 401(k) contribution DH may make is a bit complicated and will depend on how the 401(k) plan is written. There are a few 'hard' rules, though...

1. The maximum amount he may dontribute from his salary to his 401(k) pretax each year is $16,500 (2011). If he is 50 or older this year, that may be increased by $5,500. This can be divided up between the regular 401(k) and the Roth part of the 401(k), as the plan allows.

2. If DH has earnings of over 110,000, he will be highly compensated and his maximum salary deferral may be reduced in order for the plan to meet non-discrimination testing. If his salary is less than this, his ability to contribute up to the maximum amount in #1 is generally not affected.

3. Some plans allow for after tax contributions once the employee has met the maximum contribution amount. Again, if DH is highly compensated, this may, and usually is, limited.

Once his maximum has been reached, and many will argue that to the extent his contribution will be matched by the employer, any additional contributions should probably be made to your own Roth IRA. If your combined adjusted gross income (from tax form 1040) is over $179,000 you cannot contribute to a Roth, then contributing to your own traditional IRAs is usually desirable. It won't be deductible if your household AGI is over $110,000, but will be fully deductible if your AGI is under $90,000 (2011)

BruceM
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