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Hi Everyone,

I'm slightly confused here. I read the recent article on the Fool's main page regarding contributions to your 401k. Now, if I'm not mistaken, the IRS allows the max contribution to be $10,500 or 25% whichever is less.
Through my company's 401k plan (which is Fidelity) I am only allowed to contribute 16% of my salary but with my calculation (according to the IRS statement) I should be allowed to contribute more than the 16% currently to make that $10,500 limit.
If anyone has any ideas, please do post them, I really would appreciate your comments.
Thank you in advance.
Regards,
Erik
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I'm slightly confused here. I read the recent article on the Fool's main page regarding contributions to your 401k. Now, if I'm not mistaken, the IRS allows the max contribution to be $10,500 or 25% whichever is less.
Through my company's 401k plan (which is Fidelity) I am only allowed to contribute 16% of my salary but with my calculation (according to the IRS statement) I should be allowed to contribute more than the 16% currently to make that $10,500 limit.
If anyone has any ideas, please do post them, I really would appreciate your comments.


Hi Erik,

Welcome to the Motley Fool.

As with most tax rules there are additional caveats.

I'm not sure if this is the article you are referring to, but if you read it (again) I think you'll find the answer (near the end of the article):
401(k) Plan Contribution Limits
http://www.fool.com/retirement/retireeport/2001/retireeport010423.htm

Fool On,

Keith O'Malley
TMF KGOMalley

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The law (IRS Regulations) says the maximum is 25% of compensation, but companies may adopt plans that restrict the participants maximum deferral (contribution) to a lesser percent. Companies will typically do this if they intend to match any portion of the participant's contribution because the 25% maximum is indifferent to source (could be employee's or employer's or some combination.)
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The law (IRS Regulations) says the maximum is 25%.....

The 401k program I'm enrolled in pays a 5% match and a profit sharing of 4 to 6% depending on years of service, hence I'm limited to 14%.
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