Reuters Money

Employee contributions to 401(k) and 403(b) plans will be capped at $16,500 in 2011, the same amount they were set at for 2009 and 2010, the Internal Revenue Service announced. The levels are unchanged for the same reason that Social Security recipients won’t see a cost of living increase next year: inflation is too low to trigger an increase.

The income ceilings that determine when savers can contribute to Individual Retirement Accounts largely remain unchanged, too. Workers covered by company plans will find their ability to contribute to a traditional tax-deferred IRA phase out between $56,000 and $66,000; joint filers will hit that IRA phase out betwen $90,000 and $110,000if the IRA contributor is covered by a company plan; and between $169,000 and $179,000 if the contributor is not an active particpant in a company plan.

High earners who want to contribute to Roth IRAs get a little more breathing room in 2011. Couples filing jointly can make full Roth contributions at incomes up to $169,000; that phases out at $179,000. Single filers face the Roth limits at $107,000, phasing down to $120,000. Those bands are roughly $2,000 higher in 2011 than they were in 2010.

How can savers make the most of those limits? Do the math, suggests Marina Edwards, a senior retirement consultant with Towers Watson. “Divide that $16,500 by your salary and see if that is a reasonable percentage you can live with contributing, and that your plan will allow you to defer.” Contributing the maximum would amount to $317 a week. If that’s too much, increase your current contribution by even a small amount.

Contributing an extra $800 a year to a 401(k) or 403(b) plan will probably only cut your paycheck by about $550 a year because of tax savings, Edwards said. And savers who are 50 or older can still plow an extra $5,500 into their company plans.

Photo: California state worker Curtis Walker looks over retirement plan brochures at the Calpers regional office in Sacramento, California October 21, 2009. REUTERS/Max Whittaker