2009 401k Contribution Limits Roth IRA Retirement

I thought I’d take today to review the 2009 retirement contribution limits to encourage you towards your retirement savings goals for 2009. We’ve reached the mid-point of the year. Can you believe it?

After looking back at my own savings goals for 2009, I’m feeling pretty good about things. Still, I need a reminder to stay focused on the end goals. Here’s a list of the 2009 IRS retirement plan contributions limits…

2009 Retirement Contribution Limits

Traditional and Roth IRA – $5,000

401K, 403b, 457 Plan – $16,500

Simple IRA – $11,500

SEP IRA – $49,000

Defined Contribution Plan – $49,000

Keep in mind, some of these limits have “catch-up” type rules which allow folks over the age of 50 to contribute more. Also, remember that some of these limits are capped by income thresholds. Check out the IRS website for more information.

Still Time to Go for the Max

Okay, let’s say you haven’t yet contributed to a retirement plan this year. No worries. You’ve got a while to contribute, so get to it.

For your 401k, you’ve got till December 31, 2009. That leaves 6 months, or 12 paychecks if you’re paid bi-weekly. If your goal is to max out, you’ll need to put $1,375 per paycheck towards your 401k. That’s a lot, but I know there are some readers who could make this happen.

For a less daunting goal, try maxing out the Roth IRA, an retirement account that uses after-tax dollars, but allows your savings to grow tax free. Your limit is lower ($5,000), and you actually have longer to contribute. With an IRA you’ve got until you file your 2009 tax return in 2010. If you file as soon as you get your W-2′s, then make your end goal January 31, 2010. If you wait until the last minute to file, then maybe set March 31, 2010 as your end date.

Similar to the calculation for the 401k, take the IRS limit, in this case $5,000, and divide it by the number of paychecks you have left. If you’re shooting for January 31, 2010, and you’re paid by-weekly, that’s $358 per paycheck. Not too bad. Most two income families could likely do this.

So what do you think? Can you do it? I’ve found it to be easiest to save when my savings are automatically deducted from my paycheck, before I get to spend it. So, as I always say, head over to your human resource or payroll department today and set it up. But first, read how to open a Roth IRA for the first time.

Retirement savings is important, but there’s a whole lot more to getting your financial house in order. If you’re up for a bigger challenge read my mid-year financial check-up series. Good luck.

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Last Edited: July 8, 2009 @ 2:25 pm

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Debbie

Can a person who is employed and contributing the max to a company 401k plan also open a SEP IRA to contribute to from additional self employment income? If so what are the limits on both?

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Britt (Your Roth IRA)

Also keep in mind that the $5,000 annual contribution limit for a Roth IRA or Traditional IRA applies to both taken together. So if, for instance, you contribute to both a Roth and a Traditional IRA, you can only contribute $5,000 collectively.

For example, you might contribute $2,500 to one and $2,500 to the other. Or $3,000 to one and $2,000 to the other. But you can NOT contribute $5,000 to your Roth IRA AND $5,000 to your Traditional IRA in the same year. The contribution limit applies across the board to both.

Unfortunately, this isn’t always clear to some people, and they end up making an excess contribution.

Bible Money Matters

Great reminders for all of us to follow up on.. time to get cracking on maxing out the contributions!

Strick

For those with limited options (employer w/no 401K, over the income limit for deductible IRA or Roth IRA, etc) or just still have more money to stash away, don't forget to look into an HSA account to stash another ~$6K. It can basically be used as a retirement account.

Leo Vidal, JD, MA, CPA

In a future column you might want to write about Roth 401(k) plans. I always talk about these in the continuing education courses I teach for CPAs on retirement plans. To summarize, it's like the best of both worlds -- higher limits in the 401(k) than the IRA etc. and you get the Roth tax-free income benefit after you retire.

PT Money

Thanks for swinging by, Wojciech. I knew I was leaving something out. Thanks for spotting that one.

Wojciech @ Fiscal Fizzle

Not to make your monthly totals even more daunting than they already are (although if you can affort that, I agree - you should be contributing the max), but most two-income families are able to have two IRAs and two 401(k)'s at their disposal.

Soooo, if they're so inclined, can effectively double these limits, which is great for growing out those retirement funds. (Unless some family limits kick in, which I know of none).

Great post - I hope many of us can take advantage of these fantastic retirement "vehicles."