2009 Guidelines For 401K Maximum Contribution
401K maximum contribution guidelines dictate how much money you are allowed to invest in 401K accounts in a given year. The exact amount changes every year, depending on the standard cost of living. Every October, the IRS releases the new standard of living rate along with the contribution guidelines for the following year.
The maximum amount is a combined total for all of your 401K accounts, including any Roth 401K accounts you may have. Therefore, you cannot open additional accounts and put this same amount into each of them. The combined total cannot exceed the maximum rate for the year.
There are two figures that you have to consider when determining how much you are allowed to contribute for 2009: the maximum contribution as stated by your employer’s plan and the maximum amount given by the IRS.
Whichever of these rates comes out lower will be your maximum contribution amount for the year.
For 2009, the max contribution is up over a thousand dollars from the previous year. It is currently at $16, 500 and that is based on the new figures for the standard of living in the country.
Now that you know this information, you have to determine the percentage of your income that your company plan will allow you to contribute. This will always be in the form of a percentage of your total salary and never one set figure. For example, someone who earns $45, 000 a year would be allowed to contribute up to $4, 500 if their employee plan allowed for a max of 10% to be contributed.
Obviously, $4, 500 is the lower figure between the employer limit and the federal limit, so this person would only be allowed to contribute this amount in all of their accounts combined for 2009.
If you do not earn more than $100, 000 for your annual salary, then you will always be looking at your employer’s percentage figure instead of the IRS figure. The higher $16, 500 contribution applies to those in the higher income brackets.
Yet, there is an extra catch-up contribution allowed for contributors aged 50 or over. For 2009 this figure is an extra $5,500. Again, this is to be spread amongst all of your 401K accounts if you have more than one. Not every employer allows the catch-up contributions, so you must ask if you want to take advantage of the extra contribution.
If your employer contributes some of your money as a match or incentive program, that does not interfere with your 401K maximum contribution amounts. You will be able to contribute your full amount without regard to how much your employer adds into your account.
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