It is also important to take note that your employer may also impose a contribution limit on your retirement plan. Your employer contributions are also sanctioned not to exceed the maximum regulatory limits. For the year 2010, the total amount of contribution shared by the employee and his or her employer should be $49,000 only. The section 415 limit states that the amount should be less than the employee’s compensation.

Aside from the 401k contribution limits for 2010, there are a lot of facts that one has to know regarding his or her 401k retirement plan. Bear in mind it is always wise to be in-the-know regarding things that matters especially nowadays that we are faced with economic and financial instabilities. Keeping or securing a retirement plan is a must, this way you are assured of financial freedom in the years to come. Despite not having contribution deadlines, earlier enrollment for this specific retirement plan would also mean that you can start tax-deferred savings for your retirement sooner. Since the law does not oblige you to pay taxes on top of your contribution earnings, it would also mean that the sooner you enroll the higher gains you will get.

The next thing to take note of regarding your 401k is how you can make use of your gains or profit. You can invest on stocks. Anyhow, if you change your decision, you can easily allocate your 401k money in other forms of investment.

401k retirement plan allows the employee to decide on how much they can contribute in a month. This is referred to as the contribution percentage.

So while we are still working and earning, it is best that we allocate a part of our earnings to insurance plans such as the 401k retirement plan. Besides, nobody knows what the future may bring. If you enroll on such plans you are guaranteed that you are financially secured once you reach the retirement age.

In 2009, the maximum 401k contribution has changed a bit. From 2008’s $15,500, the maximum contribution has increased to $16,500 in 2009. For people aged above 50 years, the new catch-up contribution is $22,000. What are the implications of these changes?

If you are privileged and fortunate enough to be able to max out your plan this year, and over the year you use the dollar cost advantage, you may need some adjusting with regards to the percentage that you contribute every pay period. Your 2009 levels are not the same anymore with your 2008 levels.

In order to compute how much you have to contribute to maximize out your 401k in 2009, all you have to do is simply take $16,500 divided by your income or salary. For example if you are earning $75,000 annually, simply divide $16,500 by $75,000 (21.3%). Work with your 401k administrator and make sure that you contribute 21.3% to max out your 401k.

Knowledge in the maximum 401k contribution is definitely helpful. Always know how much you need to allocate for it so that you can foresee and avoid mishaps and miscalculations in the future.

A 401k plan lets employees invest retirement savings into a mutual fund or similar investment. Often employers will match employee contributions to the plan, making them an attractive way to fund your retirement because you’re already doubling your money going in. Sweetening the deal is the fact that taxes that would normally be applied to these investments are deferred.

There is a limit to how much employees can invest each year into their 401k plan. The federal government sets limits upon the total amount that can be contributed by employees tax-free. This limit was recently raised, however.

In 2009, the 401k contribution limit for workers under the age of 50 was raised to $15,500. This is up by $1,000 from the 2008 401k plan limit of $14,500.

There’s another limit for workers over the age of 50. This higher limit is set so workers over 50 can “catch up” on their retirement planning by pumping more tax-free dollars into their 401k plans. The 2009 401k yearly contribution limit for workers over the age of 50 is $22,000.

Because employers often also contribute to their employees ‘401k plan, there are also limits on the amount of tax free money they can pump into their employees’ plans. For 2009, an employer may contribute six percent of an employee’s compensation to a 401k plan. For example, if you make $100,000 per year, your employer can contribute up to $6,000 to your plan without you having to pay taxes on it.

Many 401k plans also allow employees to make contributions to their plans over the untaxed limit. The contributions made over the untaxed limit will be taxed. The government does set a ceiling on the total amount of taxed and untaxed contributions that can be made to a 401k plan. The 2009 total for all contributions to a 401k plan is $49,000 or 100 percent of your pay, whichever sum is the lesser. After 2009, the total 401k ceiling will be pegged to inflation and will be able to increase by up to $1,000 per year.

The 401k plan is an attractive retirement option in an increasingly uncertain world. Maximizing your tax-free contributions to these plans is an excellent way to ensure that you have a comfortable retirement.