2009 Contribution Limits Increase for 401k, 403b, 457, and 401a Plans
The IRS maximum allowed 401K, 403b, 401a, or 457 Plan contribution will increase from 2008’s $15,500 to $16,500 in 2009 (for those over 50 years old it increases to $22,000).
What Does this Mean for you?
Your 401k or IRA probably has seen much better days. However, the slight silver lining to this market downturn is that 401k investors are able to dollar cost average at much cheaper levels than a year ago. Try to be an optimist. Think of buying securities at a 401k 30% off sale. Since your outlook for 401k or IRA funds is long term, this is a great opportunity.
How do I calculate how much I need to Contribute to Max out my 401K?
Simply take $16,500 divided by your total salary. For instance, if you make $100,000 per year (including bonuses), then take $16,500/$100,000. You end up with about or 16%. In this instance, this means that you would have to work with your HR department or more likely, your 401K administrator, to change your contribution to 16% in order to max out your 401K for the year.
Review your 401k Holdings
It is always a good idea to screen your mutual funds in your 401k. Take the fact that 2009 is a new year to go back and review who funds have performed well in your 401k, and which have been less than desirable. Make sure that you come up with the correct asset allocation as well, as your risk tolerance may have changed. eRollover has a
great free 401k tool that helps to insure that your asset allocation is dead on with your goals.
Do not forget that many companies have a 401k match.
For those who can AFFORD to do it, maxing out your 401K can rarely be seen as a bad strategy. If your employer matches you up to the max, it may especially be to your benefit to take advantage of the free money.
Things to think about for your 401k in 2009:
• Did you max out your 401K, 403b, or 401a Plan?
• Do you plan on maxing out your 401K, 403b, or 401a Plan in 2009?
• What percentage of your contributions are eligible for an employer match?
