401K Maximum Contribution Guidelines For 2009
Aug 5, 2009 Business Loan
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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 amount that you are allowed to contribute is a combined total for every 401K and Roth 401K account that you have. That means you cannot put this amount into every account, but have to split the amount amongst the different accounts if you have more than one.
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.
Take the lower figure of these two and you have the maximum amount you can contribute for the year.
For 2009, the maximum amount that anyone can contribute is $16,500. That is up $1,500 over last year and the change is due to the fluctuations in the standard of living rates across the country.
The maximum figure set by your employer will be based on your total salary for the year. It will always be a percentage of whatever you earn for the year, rather than an exact figure for everyone. For an easy example, consider someone who makes $30, 000 for the year of 2009. Their employer plan allows for up to 10% of their salary to be contributed, so their max according to this plan would be $3, 000 for all combined accounts for the entire year.
This figure is much lower than the amount the IRS has set, so it will be the maximum amount you can contribute to all of your 401K plans for the year of 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.
If you are over the age of 50, you have a special allowance that your employer may or may not allow on your plan. It is called the catch-up contribution and is only available to those who are over 50 years old. The amount of this extra contribution is determined every year based on the national standard of living figures as well. For 2009, qualified contributors can kick in an extra $5, 500 for all accounts combined.
If your employer matches part or all of your contributions, this added money is not included in your 401K maximum contribution. You can contribute the full amount of your maximum figure and everything your employer throws in is extra.
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