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The plan allows a working individual to save money and in most cases the employer also contributes matching amount to the plan. This is what makes this retirement plan profitable for a lot of people. Most people have a say in the amount they want to contribute and where the contribution should be invested. The employer will have an approved list of funds and you can only invest in those.
However, there is a maximum yearly amount that you can contribute to a 401k retirement plan. In 2007, the maximum yearly contribution was $15,500. In a recent press release, the IRS announced that maximum yearly contribution even in 2008 will remain the same. For those who are 50 years and above, have catch-up plan. These senior people, the annual limit on catch-up contributions remain the same as 2007, which is $5,000.
Therefore, for 401k maximum yearly contribution is as follows for 2008:
- $15,500 for people under 50 years
- $15,500 plus $5,000 for those who are 50 and above
In addition to the maximum yearly contribution to a 401k retirement plan, there are many other limits. These limits could result in you contributing less that what is stipulated by the IRS. In order to find out the limitations of your plan, contact your plan administrator, who should have written information which will clearly explain the limits and all the other rules and regulations.
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