A few months earlier when I discussed my 2005 plan of 401(k) contributions, I mentioned I would be slow in contributing to my own account for short-term liquidity but will contribute to the full amount toward my wife's 401(k) account to shielf as much fund as possible from immediate income tax. Some new developments since then changed part of the landscape and I am therefore changing my directions now.
First, we realized that in 2005, Microsoft 401(k) Plan allows deduction of up to 50% of payroll as pre-tax contribution toward 401(k) accounts, compared to the upper limit of 25% in the prior years. As a result, almost everyone in Microsoft can contribute to the full amount of $14,000 allowed by IRS -- after all, if you are willing to save, you only need to earn $28,000 a year to achieve this maximum allowed contribution amount. (It is interesting that Microsoft didn't advertise this employee-friendly move.)
Second, there is a small possibility that I will be assigned to a short-term overseas project later this year and if this becomes true, I will be technically removed from Microsoft's US payroll, thus become ineligible of contributing to 401(k) plans. It is, therefore, in my best interest trying to contribute to 401(k) account to the full allowed amount as early as possible.
So, starting from my February monthly summary, you can see I am putting my 401(k) contribution percentage to full throttle. By contributing 50% of pre-tax payroll to both 401(k) accounts, we are expecting a full $28,000 contribution (plus employer matching) well before the year ends.