401(k) participation

The $20,000 is your maximum deferral from all salary sources. Thus, if you had 401(k) deductions of $10,000 at your prior job, you have only $10,000 left to defer this year. You are responsible for seeing that you don't go over the limit. That said, if you haven't had any prior deferrals in 2007 and you earn at least $20,000 at the new job in 2007, tax law allows you to contribute the full $20,000. Your plan may have restrictions that prevent it.

-- Phil Marti Clarksburg, MD

This year's maximum employee deposit is $15500, plus the $5000 catch-up if 50 or over. Each plan can decide on the maximum percentage allowed. This is to avoid "top heavy" issues where highly compensated people put in too much in comparison to the rest. I believe this does not apply to the catch-up portion. My employer allows withholding of 30% for regular contribution, and additional 30% for catch-up. So a 50 year old can save 60% of gross income until the $5K for the catch-up is accumulated, then it drops to just the primary

30%. You need to check your benefit documents or call the benefits department to confirm maximum percent. No offense to co-workers in general, but an average employee is not likely to know this. If for no other reason, than the fact that none are likely to want to save such a high percent. JOE

"RaS" wrote

Talk to the plan administrator (someone at the company) who can confirm their rules, but generally contributions are based on the income for the period you were an active participant, meaning the earnings from November and December. If so, maybe ask the employer to defer your pay till you are a plan participant so you can bulk up those last two months. Unless there's some matching issues they don't want to get in to, they should be able to oblige.

-- Paul A. Thomas, CPA Athens, Georgia

** Yes, if you're over 50 you can contribute an additional $5,000 for a total salary deferral limit of $20,500 in 2007. (The base contribution limit is $15,500, increased from $15,000 in 2006.)**

**You can contribute up to 100% of your compensation. So assuming you've made $20,500 on the year, then yes, you can contribute the maximum. You'd just have a much shorter time to do so. **