401k limit: Roth 401k plans are an alternative to traditional 401k plan. Contributions to a Roth 401k plan is made through payroll deductions. the amount of money you want to contribute and the money is taken directly from your paycheck is specific to your company. You must also specify the option that investment company offers you want the money made. The money is still included in your taxable income because Roth 401k plans uses after-tax money. However, you are allowed to withdraw the money tax-free at retirement.
The annual contribution limits, the Internal Revenue Service US It sets an annual limit on the amount you can put into your Roth 401k each year. The 401k limit depends on your age and is adjusted each year for inflation. For 2010, the limit is $ 16,500 if you are under 50 years old. If you are 50 years or older, you can contribute an extra $ 5,500 for a total of $ 22,000 ;. Earned Income, in order to make a contribution to your Roth 401k, you must have earned income greater than or equal to their contribution. If your earned income for the year is below its annual contribution limit, the total earned income becomes the contribution limit.
For example, if you were 55 in 2010 and had earned an income of $ 18.000, which is less than the limit of the typical contribution of $ 22,000 for a person of 50 years or more in 2010, the contribution 401k limit for year would be $ 18,000 ;. Employer contributions; Employers are allowed to make matching contributions to your Roth 401k, but the total can not exceed the annual limit, which is adjusted for inflation annually. For 2010, the combined contributions of the employer and the employee can not exceed $ 49,000.
However, the IRS does not allow employers to put that money into a Roth 401k plan.
Instead, the IRS requires contributions for going to a traditional 401k plan. This money is not included in the taxable income for the year is contributing, but will be taxed when withdrawn ,.
considerations 401k limit:
The contribution limit applies to both traditional 401k plans and Roth 401k plans cumulative. This means that $ 16,500 and $ 22,000 for 2010 have both traditional boundaries as 401k and Roth 401k contributions to the limit. For example, if the 401k limit was $ 16,500 and you put $ 7,500 in a traditional 401k plan, which could only put $ 9000 in your Roth 401k that year ;. Warning: Not all employers offer a choice of Roth 401k. If your employer does not offer Roth 401k plan, you can not contribute. Some employers offer only a traditional 401k or retirement plan at all.
You can not start a Roth 401k plan as an individual. However, if your income is low enough, you may be able to contribute to a Roth IRA, which offers similar benefits.