Cook Wealth Management Group

2010 Retirement Contributions

The following is a brief overview of maximum retirement contributions for 2010.

Social Security

The wage base for Social Security tax withholding is unchanged for 2010; it remains at $106,800, making your maximum withholding $6,621.60.

IRA Accounts

Individuals can contribute the lesser of $5,000 ($6,000 for individuals 50 and over) or 100% of their compensation includible in gross income.

Roth IRA Accounts

Individuals can contribute the lesser of $5,000 ($6,000 for individuals 50 and over) or 100% of their compensation, reduced by the amount of contributions made to all other IRAs.1

401(k), 403(b), and 457 Plans

The maximum before-tax contribution remains at $16,500. Individuals who attain age 50 by the end of the plan year may make additional pre-tax “catch-up” contributions of up to $5,500.  Plan contributions may be based on up to $245,000 of salary.

In order to maximize your employer match to your contribution, set your withholding percentage correctly.2 To determine your contribution rate (so that you can contribute evenly over the entire year,) divide the amount of before-tax contributions you would like to contribute for the whole year by your estimated annual eligible pay.

For example, if you have an annual salary of $225,000, you could pocket an extra $5,000 just by lowering your contribution rate:

401(k) Contribution Rate 15% 7%
Timeline & Payments Made Before Maximum Reached3 Approx. 5 ½ months
(11 payments)
Approx. 11 months
(22 payments)
Total Employer Contribution (assuming 4% match) Approx. $4,125 per year Approx. $9,000 per year

Note: Maximum contributions have not changed from 2009.

1 If you and/or your spouse are enrolled in a retirement plan and your adjusted gross income is in excess of certain IRS designated income limits, your contribution may be limited. We recommend discussing this, and all other tax matters, with a qualified tax professional.

2 Be sure to reevaluate your contribution rate after a bonus or wage increase; contributions withheld in these instances may cause you to reach the maximum employer match much sooner than you expected.

3 Timelines are approximations and based on bi-monthly payment.