2010 Limits

• For 2010, employees can contribute up to $16,500 to their 401k plans. Contributing that much can be a struggle for most workers, but those who can afford it should consider maxing out their 401k plans. Every dollar you invest in your 401k is another dollar that is not taxed, reducing your taxable income and your current tax liability. That money then grows tax deferred, and it is only subject to taxation when you withdraw it in retirement.
  
  

Catch -Up Provision

• Workers who are 50 years of age and older can contribute extra money to their 401k plans under the catch-up provision. This provision is designed to help older workers catch up on their retirement plan contributions and build up their nest eggs before they retire. In 2010, those older workers can contribute an extra $5,500 to their 401k plans.
  
  

Changing Limits

• The contribution limits governing 401k plans do not stay static. The IRS reviews a number of factors each year to determine the contribution limit for the coming year. That is why it is always a good idea to check the IRS website, or to consult your tax preparer, before setting your 401k contribution for the coming year. The administrator of the plan should keep track of your contributions and stop them when you reach the limit, but it is best to double-check the limits to avoid problems with the IRS.
  
  

Employer Match

• Many employers match the contributions that their employees make to their 401k plans. The limits of these matching contributions varies from company to company, so it is important to check the details of your own plan. One common arrangement is for the company to match 50 cents of every dollar invested by an employee, up to the first six percent of contributions. That equates to an extra three percent of the employee's salary, or an extra $900 invested in the 401k for a worker who makes $30,000 a year.