401k Retirement Plan 2010

401k Retirement Plan 2010

A 401k Retirement Plan 2010 is a defined contribution retirement plan that allows employees to have part of their pre tax pay deducted from their paycheck and put into an account that will be held tax exempt until such time as the money is actually used. In some cases, the employer agrees to match each dollar that the employee contributes to the 401k plan, up to a certain percentage that the employer determines, with a contribution to the account. There are two basic types of 401k plans, a bonus or profit-sharing plan, and a thrift plan.

401k Retirement Plan 2010 - IRS Announcement

The IRS announced that cost-of-living adjustments for pension plans and other retirement plans for tax year 2010 will remain unchanged. This is good news for many who had feared that the limits would be reduced. Each year in October these limits are adjusted according to a formula based on the inflation rate in the third quarter vs. the previous year’s quarter.A 401k Retirement Plan 2010 is an employer sponsored retirement plan and is grouped into two categories defined benefit and defined contribution. With a defined benefit plan, the employer promises to pay a defined amount to retirees who meet certain eligibility criteria. With a defined contribution plan, the plan defines the contributions that an employer can make and not the benefit that the employee will receive at retirement.

A defined benefit plan usually links the benefit to the amount of service and is based on the final average salary. Employees can usually predict the monthly retirement income they might receive with this type of plan and might also be given the choice of a lumpsum benefit at retirement.

401k A defined contribution plan is not a defined benefit so the employee cannot predict a monthly retirement income. If an employee leaves the company, they usually receive the proceeds in a current or deferred lump sum or annuity.

401k Contribution Limits 2010

401K and other Retirement Plans: The maximum amount an employee can contribute to a 401(k) in 2010 will remain at $16,500 and for individuals over the age of 50, their catch-up contribution will remain unchanged at $5,500 (see table). The Federal government’s Thrift Savings Plan and other retirement-savings plans – like Individual IRA‘s and 403(b) plans – are subject to the same limits.

Your 401k maximum contribution limit — the combined total maximum contribution that you can make each year to ALL 401k plans in which you participate, including standard 401k plans and Roth 401k plans — is the lower of: (1) the maximum percentage contribution limit allowed under each of your employers’ plans, or (2) the dollar limits shown in the table above. For example, if your employer’s 401k plan allows you to contribute up to a maximum of 10% of your salary, and you earn $50,000, your maximum contribution limit is $5,000, not the $16,500 contribution limit in 2009 that applies only to higher-paid employees.

The matching contributions made by your employer are NOT counted toward your 401k contribution limits. Even if you contribute the maximum amount each year, your employer’s matching contributions are in addition to these 401k limits.

Possible 401k Retirement Plan 2011

After no change in 2010 401K , thanks to near zero real inflation, it is likely that in 2011 we will only see marginal increase again. However some new retirement legislation like 401K/IRA to Roth IRA rollovers are still available in 2011 and could be beneficial for many looking to implement smart tax strategies in a rising tax environment and possible expiration of bush tax cuts.

Based on the most recent CPI data, inflation is running at about 2%. Given a sluggish economic environment and various forecasts it is likely that inflation will stay around this level. So extrapolating from this we can expect between a 0% (current levels) and 3% rise in the retirement account limits.

401k Retirement Plan 2010

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