The annual maximum contribution for 401(k)s has been raised by 6.2%, to $8,475 -- the largest annual increase since 1987. Employers don't pay payroll taxes on their contributions, and employees pay no taxes on deferred income until retirement.
Employers who want to learn more about 401(k)s should consider "401(k) Plans -- Cash or Deferred Arrangements," a free 13-page booklet from Coopers & Lybrand, ABC, 1800 M St. NW, Washington, DC 20036. Companies with 401(k) plans should consider "Risk Tolerance Quiz," a free 10-question test that helps employees decide how to invest their 401(k) savings, from IDS at (612) 339-6368. -- Jill Andresky Fraser