401k Contribution Limit: What Are The 2009 401K Limits?
The current year's 401k contribution limits determine how much money you are entitled to contribute to your 401k plans for the entire year. This means the collective total of contributions to all 401k plans in your name cannot exceed this maximum amount. It even includes Roth 401k plans in the same total.
There are two numbers you need to collect before determining your personal maximum contribution limit. First, find out how much of your salary your employer's plan will allow you to contribute. For example, if your employer has set up a plan that allows you to contribute up to 10% of your salary and you make $45,000 for 2009, then your employer's limit will be a yearly contribution up to $4,500.
This is not necessarily your personal limit because there is also a maximum contribution level set by the government. Your limit will be the lower amount between your employer's allowance and that set by the government. The government rate is really a guideline for those that make well over $100,000, as it is usually set quite high.
As far as the 2009 401k limits, the IRS has determined that no one can contribute more than $16,500.
For our example, since the employer's limit is lower, that would be your contribution maximum for all of your 401k plans for the year. The government set limit would not apply to you.
Also, there is something called a "catch up contribution" for anyone over the age of 50. This allows for an extra $5,500 over the course of the year. This is as of the latest 2009 401k limits. Again, this is collective over all of the 401k plans held.
The 401k contribution limits change every year and are a reflection on the changing cost of living in the country. It is important to check each year to determine how much you are allowed to contribute and how you wish to split up the total amongst all of your 401k investment plans.
When it comes to your 401k plan there are a number restrictions and rules in place. One such rule is the contribution limits. You may check the site for the most recent 2009 401k Limits, as well as other retirement accounts like the IRA.
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