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Debra,

There's one statement you wrote that I wanted to elaborate on, It is eligibility not participation that changes the income limits.

Actually, eligibility and participation are the same thing for a 401(k) under IRS rules. An employer may allow you to contribute to a 401(k) plan next year; but under IRS rules, if you don't contribute you weren't eligible.

This is true for any defined contribution plan your employer may offer. This is to give you some measure of choice so that you're not forced into some poorly designed plan offered by your employer. This is not true of defined benefit plans such as a conventional pension plan. If you are eligible to acrue a benefit from a pension any time next year it may affect your eligibility status and may potentially make any contributions to a conventional IRA non-deductible.

- Joel
I hope that made sense.
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