Each year the IRS sets 401k Contribution Limits, which defines the annual dollar amount a participant(s) of a company sponsored 401(k) plan can contribute to their individual account.

For the 2011 tax year, the limits are $16,500 for individuals under 50. For those over 50, the total is $22,000 including catch up contributions. These limits also apply to 401k and Roth 401k plans.

Catchup Contributions
For participants who are at least 50 years old, they may contribute an additional $5,500 per year to their individual account for a combined limit of $22,500.

Contribution Deadlines
Unlike the deadline for IRA contributions, which is April 15th, the last day you can make a contribution to your 401k plan will the last day of the plan year. This will usually be December 31st of the given year, which is known as a calendar plan year end. Anything other than a calendar year is known as a fiscal plan year end.

A Few Things To Remember
If your company offers an employer match, always try to capture the entire match by deferring an amount that won’t leave any free money on the table. Let’s look at a couple examples below:

Example 1. In the most simple example, lets say your company matches “dollar for dollar” or 100%of the first 3% of your salary deferrals. Obviously, you would want to defer 3% in order to receive the full 3% company match. Anything under 3% would be leaving money on the table.

Example 2. Lets say your company matches the same “dollar for dollar” or 100% up to 3% and then 50% on the next 3%, for a total possible company match of 4.5%. The 2 difference in this example from our first example is that in in this example you have a larger match available (4.5%), but you have to defer 6% of your salary in order to capture the full match. This is known as a tiered match. Sometimes companies will design their plan this way in order to encourage higher salary deferrals.If you’re unable to maximize to the full 401(k) contribution limits, at least try to increase your salary deferral each year.  Some people will increase their deferral percentage by the same amount of their annual pay raise.This way you don’t necessarily notice a drop in income. Of course, this is assuming you receive a pay raise and  there is no rise in inflation.

Try to keep track of and consider how much you’ll need to save for a comfortable retirement sooner vs. later.  The sooner you can prepare for a comfortable retirement the better. Don’t wait until the last minute or the last 10 years. If possible save up to the annual 401k contribution limits each year.

Summary
Knowing the 401k contribution limits and managing your long-term savings goals is one of the most important considerations you’ll undertake when managing your personal finances and specifically your retirement objectives. Often times we ignore things we don’t understand or have the answers to. However, having a comfortable retirement requires years of planning and know where you are along the way. It’s not something you can just do when you get around to it. The more you can learn on your own the better. Hopefully, this has helped answer some questions for you regarding the limits and deadlines for 401k plans.