It happens to us every year. My wife makes good money and her company's employees are young and contribute very little to their 401ks. Any "excess" is forced back the next year and required to be reported on the prior year tax return. Tax penalties will mostly ensue. Therefore, we contribute very little to her 401K to avoid the problem. Even though congress allows more money to be put into the 401ks every year for most people, it does not apply to people making 95K a year. A 401k is a stupid government program that prevents the most productive people in society from saving for retirement.

Yep - Last year I moved into the 'highly compensated' realm... We're also not eligible for Roth IRAs due to our combined income being too high.

Interestingly enough my contribution limit was just raised from 10% of salary to 16%... Not sure if the federal rules changed or participation levels rose enough...

I think that's a bit short-sighted to say that "a 401K is a stupid government program that prevents the most productive people in society from saving for retirement". While I applaud the success of you and your wife, there are more people in the US who need the tax advantages a 401K provides to have any chance of securing a retirement whatsoever.

I can see your point in terms of where the limitations are too stringent for your combined level of income, but those who make substantially less (and sometimes have careers that are equally as beneficial to society, it not as well-paid) need those tax advantages. I would argue that anyone who's making over six-figures and feels prevented from saving from retirement needs to learn to live more conservatively.