Actually, this year she switched hers to an IRA.

The other issue we've run into is that there is some law that says (and I forget the exact details) 401k contributions from the highly-paid employees can't be more than x% greater than the average employee contribution in the company. So if you work someplace where several other people are not doing 401K allocations, you get a "refund" at the end of the year (has happened to both of us).

Which is limited to $5,000 per year at best (if not old enough for accelerated contributions), isn't it? Or am I missing something?

Only Roth IRA is limited to $5k a year.

This doesn't agree with my understanding of the tax code as reported on IRS.gov. For example:

http://www.irs.gov/retirement/article/0,,id=202510,00.html:

"The maximum contribution that can be made to a traditional or Roth IRA is the smaller of $5,000 or the amount of your taxable compensation for 2011. This limit can be split between a traditional IRA and a Roth IRA but the combined limit is $5,000.The maximum deductible contribution to a traditional IRA and the maximum contribution to a Roth IRA may be reduced depending on your modified adjusted gross income."

Also, this table seems to agree:

http://www.irs.gov/retirement/participant/article/0,,id=2025...

This is for 2011, but my recollection is that 2010 had identical wording.

Yes, but a 401k has an annual contribution limit of 16.5K while an IRA allows only 5.5K in annual contributions.

Ideally, having both accounts would give you 23K of tax-advantaged savings.