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401(k) Contribution Limits for 2006

If you have a 401(k) plan that you participate in, then congratulations. If you are eligible to participate in a plan but do not, then why? We would be happy to talk with you to help you understand the potential benefits. There are a few cases where participation might not be desirable, and if you think you are in that situation we would be happy to talk to you about those particulars too.

Tha maximum contribution one can make to their 401(k) plan in 2006 is increasing to $15,000. If your company makes matching contributions then you should take advantage of that. In some cases it is important to set your contribution level so as to participate in the company matching for every pay cycle of the year. If you are not sure how your plan works, we can help you look at that and then determine your best contribution rate.

You are eligible to make the additional catch-up contributions beginning the year in which you turn 50 years old. In other words, anyone born in 1956 or earlier make take advantage of this extra contribution limit during 2006. The amount you can contribute is $5,000. This is in addition to the regular limit of $15,000. That means you could contribute up to $20,000 during 2006.

All of that is normally tax defered, meaning you will not pay income tax on the amount. Effectively this means that the government desires to help you save for retirement. What a deal!

"Tax software is no substitute for tax knowledge."

Any views expressed herein are based on our best information. The content of this web site was written as general information without specific individual information and thus may not apply in all situations. This material was not written, and cannot be used by the taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.

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Janelle Ogg, EA
Richard Ogg, EA