Cathup Contribution for 401lK plans

[Foodeefish]

How does someone contribute over the 401K plan $15,000 limit for 2006? My wife is 52 and we have never contributed over the basic minimum and it looks as though once she turned 50 years old, we culd have contributed more? Can we go back in tme or once the year is over we lose this option?

 

[Mwsinron]

I believe folks 50 and older can contribute 20000 total. There is a provision to catch up but its based on a whole slew of rules. Its on the IRS site. I would also suggest to have your wife talk with her HR person. I also believe starting in 2007 contributions will go up based on inflation in 500 dollar increments? Not real positive on that.

 

[2B]

If someone is 50+ they can contribute $20,000 in 2006 to a 401k. That's all that matters. Don't worry about the "catch up" phrase. It's to help all the schmucks that have suddenly woken up and realized they don't have any retirement savings at 50 years old.

 

[Alan]

Not all employers allow the extra 5,000. Just ask your HR department. You may find that they will not allow you to contribute more than 20% of your paycheck so you may need to get it going asap as the year is more than half over.

I very much doubt they will allow it retrospectively, but no harm in asking.

 

[cute fuzzy bunny]

A condiment for people with a lithp?

 

[IHateCNBC]

How does someone contribute over the 401K plan $15,000 limit for 2006? My wife is 52 and we have never contributed over the basic  minimum and it looks as though once she turned 50 years old, we culd have contributed more? Can we go back in tme or once the year is over we lose this option?

If you are eligible I would max out the Roth IRA first.

 

[Spanky]

Can we go back in tme or once the year is over we lose this option?

I think it is the latter. If you miss the deadline to contrinbute, the contribution is not retroactive. That is, you can still contribute a maximum of $20,000 for 2006 but too late for 2005. You might consult a tax lawyer or the IRA to confirm.

 

[LOL!]

Just a note to add: One must be 50 years old on December 31, 2006 in order to contribute the catch-up contribution this year. You do not have to be over 50 to take advantage of the catch-up provision, just reach 50 by year-end.

My spouse has a late birthday, but has been contributing since the beginning of the year at a rate to reach the $20K by year-end. This way she wouldn't have to come up with $5000 from her last paycheck.

 

[ESRBob]

Foodefish,
You probably know this, but I'd say max out 401k contributions at the 20k level even if it means using other taxable savings to live off, since the goal is to get as much of your saving into tax advantaged vehicles as possible.

Later, when you retire or ER, you can take advantage of your lower income and tax brackets to convert some of the eventually taxable regular IRA/401k funds into Roths, should you wish to.

Don't forget, you can make a contribution to a Roth IRA in addition to your 401k each year, assuming you meet the income requirements.

And see if your employer offers a Roth 401k -- it is new but some do offer it. Basically it lets you get the bigger 401k contributions straight into Roths.

 

[Texas Proud]

Not all employers allow the extra 5,000.  Just ask your HR department.  You may find that they will not allow you to contribute more than 20% of your paycheck so you may need to get it going asap as the year is more than half over.

I very much doubt they will allow it retrospectively, but no harm in asking.

It might just be me.... but I do not think a company can prevent you from contributing the money.. it is in the law that says you can...

However, they can have a maximum percentage as it is also written in the law, but a company can have a lower percentage... (ie, only 8%) if they wish..