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fs5390

Can I Contribute 50% Of My Gross Income?

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From our 457 FAQ section.

 

How much can be contributed to a governmental 457(b) plan?

For 2006, workers are able to contribute the lesser of:

 

1. the new employee elective deferral limit of $15,000, or

 

2. up to 100% of includable compensation (must be less than the elective deferral limit).

 

So the answer is yes.

 

Dan Otter

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From our 457 FAQ section.

 

How much can be contributed to a governmental 457(b) plan?

For 2006, workers are able to contribute the lesser of:

 

1. the new employee elective deferral limit of $15,000, or

 

2. up to 100% of includable compensation (must be less than the elective deferral limit).

 

So the answer is yes.

 

Dan Otter

 

 

If it's the LESSER of $15k or 100% of compensation...and he makes $35k, and wants to contribute 50% of his income...isn't the answer no?

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Actually it depends on his age if he is 25 he would only be able to contribute about 42 percent of his salary. However, if he is eligibe for the special catch up provisions of a 457 he could contribute up to 84 percent of his salary.

steve

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FrenchTeacher,

 

It's my understanding that if an employee only makes say $15,000 a year he/she could actually contribute 100% of their salary. In this example it would $15,000. So Fs5390, who makes $35,000 a year, cannot contribute 100% of compensation--not that that is what he/she is suggesting--because that is more than the elective deferral limit ($15,000 for 2006), but he can contribute $15,000. He could do that if he/she made $15,001 a year. And if someone made $14,000 a year, they could not contribute $15,000 a year. In this case his/her salary--$14,000--and contribution--$14,000--would be 100% of compensation which would be less than the maximum deferral amount. If my thinking is correct--which isn't always the case--I think the IRS is letting investors know that if they do not make a substantial sum, say $10,000 a year, they could actually contribute the entire amount.

 

ssarles,

 

Never heard of such a breakdown, no that it isn't possible. I do know that prior to EGTRRA, 403(b) contributions were tied to such things as salary and prior contributions. EGTRRA simplified contribution amounts for the 403(b) and I believe the 457(b).

 

Dan Otter

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FrenchTeacher,

 

It's my understanding that if an employee only makes say $15,000 a year he/she could actually contribute 100% of their salary. In this example it would $15,000. So Fs5390, who makes $35,000 a year, cannot contribute 100% of compensation--not that that is what he/she is suggesting--because that is more than the elective deferral limit ($15,000 for 2006), but he can contribute $15,000. He could do that if he/she made $15,001 a year. And if someone made $14,000 a year, they could not contribute $15,000 a year. In this case his/her salary--$14,000--and contribution--$14,000--would be 100% of compensation which would be less than the maximum deferral amount. If my thinking is correct--which isn't always the case--I think the IRS is letting investors know that if they do not make a substantial sum, say $10,000 a year, they could actually contribute the entire amount.

 

 

 

I guess I was confused by the title of the thread: "Can I Contribute 50% of My Gross Income?" If he makes $35k a year, it still seems to me that he cannot contribute 50% of his income, which would be $17.5 and over the IRS limit.

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