2009 401(k) and IRA Contribution Limits

If you haven’t contributed to the limit in your individual retirement account for 2008 tax year yet, you still have 10 days to do so. As long as the contributions are made before the tax day on April 15th, they can still be considered as contributions for 2008.

In 2008, I contributed close to the maximum $15,500 allowed for 401(k) account in September and maxed out IRA account in October 2008. After missing out a large portion in 401(k) in 2007 after changing the job middle of the year, I determined to take advantage of the tax-free growth of money in 401(k) account last year, despite no company match whatsoever. While it will be nice if my employer was willing to provide some extra help, I am not going to let whether there’s a employer match or not hold me back because I am saving for my own retirement. With that determination, I started the year contributing very aggressively, setting aside 20% of my salary into my 401(k) account. Though it doesn’t seem to be a good strategy as stock markets basically collapsed in the second half of 2008, I am still glad I finished my goal early. For IRA account, I divided the $5,000 annual contribution into 4 parts and invested a quarter every three months. I have been using this approach for years and it actually served me quite well: For one, I don’t’ have the pressure to make a large contribution at once; for two, I could better migrate the risk by spreading my investments throughout the year.

For 2009, I will continue to employ the strategy I used last year to build my retirement funds. In fact, new changes in 2009 retirement account contribution limits, especially 401(k) accounts, make it even easier to save more for retirement:

• 2009 IRA contribution limit remains the same at 2008 at $5,000, but the phase-out limit has been increased from $159,000 – $169,000 for couple filing jointly in 2008 ($101,000 – $116,000 for single) to $166,000 – $176,000 in 2009 ($105,000 – $120,000 for single).
• 2009 401(k) contribution limit goes up to $16,500. If you are age 50 or older, you can make another $5,500 catch-up contribution.

Are you still investing in your 401(k) and/or IRA accounts amid stock market turmoil?

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