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Questioner: aaron

Question: the irs says for 2010 you can contribute 16,500 to your 401k.
For some weird reason my company only allows its employees to contribute 15% of their salary to the company 401k plan. For me that comes out to about 8k. Is there any type of retirement account i can open that will allow me to put the remaining $8500. I know about IRA but thats a different limit and different vehicle.

Answer: Aaron, thanks for your question. What is happening is that a 401k is a different animal and requires a lot of behind the scene testing so that the plan is compliant and does not discriminate between highly compensated employees. The fact that your company restricts contributions is nothing new.

You can go ahead and contribute into your 401k up to the limits and then go ahead and contribute into a traditional or roth ira depending on your overall plan. However, since you are covered by an employer plan your contributions into a traditional ira will probably not be able to be deducted on your tax return.

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