Tax Tip of the Week
January 15, 2007

• In 2007, you can defer up to $15,500 of income into a 401(k) plan, up from $15,000 last year. The same change applies to 403(b) plans sponsored by tax-exempt organizations.
• The deferral limit for SIMPLE plans increases to $10,500, up from $10,000 in 2006.
• Catch-up contributions for those aged 50 or older remain unchanged at $5,000 for 401(k) plans and $2,500 for SIMPLE plans.
• There's no change in the maximum IRA contribution. The limit for both Roth and traditional IRAs will stay at $4,000 until 2008. The additional catch-up contribution allowed for those 50 or older remains at $1,000.

• Contribute at least enough to obtain your employer's match in a 401(k) plan.
• Defer as much income as you can each month. You don't have to spread your contributions evenly over the year. If you reach the limit before year-end, your contributions will stop and you'll have a bigger take-home paycheck.
• If you'll reach age 50 during this year, remember to factor in your catch-up contribution. You don't have to wait until your 50th birthday to increase your contribution rate.
• Contribute to an IRA as early in the year as possible. If you make your contribution early, it will have longer to grow tax-free.

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