Before we talk about the 401k contribution limit for 2007, we better make sure we are on the same wavelength. Too few people understand what the reality of retirement is going to be like for most of them. Social Security is in trouble and is almost certainly, going to be at best inadequate for a comfortable and happy life after you retire. Unless you also have a very good pension plan from your employer, even adding on the pension may not be enough. Inflation is not going to stop and everything is going to cost more than you now expect.

To ensure your comfort you need to take action now. The longer you wait the more difficult it will be to accumulate sufficient funds to live the way you would like to. Saving and investing now through every vehicle you can find, IRAs, Roth IRAs and 401K plans and your own program of post-tax investments can allow you to end up with very substantial resources based on years of relatively small contributions thanks to compounding over time.

The particular advantage of plans such as a 401K is that, in most circumstances you can fund them with pre-tax dollars and reduce your current taxes, accumulate interest on a tax-free basis and only be taxed when you retire and normally will be subject to a lowered tax rate. 401ks also offer you higher contribution limits than any of the IRAs. The 401K limit 2007 as set by the government is ,500. Unfortunately this does not mean you can necessarily contribute this much.

A 401K contribution limit is usually also set by your employer as a percentage of your salary. As an example, your employer sets a 401k maximum contribution of 10%. If your salary is $47,000, then the maximum 2007 contribution limit for you is $4700 despite the government maximum. If your salary were $186,000, even though 10% would come to $18,600 you are now limited by the government set maximum of $15,500.

If you are over 50 - and if your employer allows it - you can also make a $5000 "catch-up" contribution on top of the limits which would make the maximum $20,500. Also, any matching contribution up to 6% which your employer makes on your behalf is not included in the limits. So, in the best of all possible worlds, depending on the employer set limits, your age, your salary and a matching contribution, you could put away well over $20,500. If you were over 50 with a salary of $150,000, an employer limit of 10%, and an employer match of 6%, you could stash away $29,500.

Obviously, your situation and your employers rules are critical to your 401k contribution limit. You do not owant to end up either under or over contributing. Therefore you need to be certain to check the limits for each year and always be aware of the rules your employer establishes. For a secure and pleasant retirement, maxing your 401K limit 2007 - and every year - is one of the best things you can do. This is not something you should put off. Treat it the same way you would treat a mortgage payment, as an absolute requirement. The sooner you start, the more those contributions will add up and compound themselves. The sad fact is that too few people do it when they should and by the time they regret it, it has become either much more difficult or flat out impossible.