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October is an important month if you have one or more 401K investment account. This is the month that the IRS releases the updated standard of living rate. This is the figure which determines how much you will be allowed to contribute to all of your accounts in the next year. This amount and the rules surrounding it are the 401K maximum contribution guidelines.
October is an important month if you have one or more 401K investment account. This is the month that the IRS releases the updated standard of living rate. This is the figure which determines how much you will be allowed to contribute to all of your accounts in the next year. This amount and the rules surrounding it are the 401K maximum contribution guidelines. 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. You must consider the maximum contribution amount as stated by your employer's plan as well as the maximum rate given by the IRS when determining how much you can legally contribute. Whichever of these rates comes out lower will be your maximum contribution amount for the year. The IRS maximum for all contributors for 2009 is $16, 500. Last year it was only at $15, 000, which reflects the changes our national standard of living has gone through over the last year. The maximum contribution guidelines from your employer will be in the form of a percentage of your salary. For instance, if you earn $65,000 a year and are allowed to contribute up to 15% of that salary according to the plan your employer has set up for you, then you would have a maximum contribution of $9,750. 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. $16,500 a year would be the ceiling mainly for people who earn a larger salary every year. If you earn less than $100, 000 a year in salary then chances are you will have to go with the percentage of your salary as given by your employer. If you are 50 years of age or older you can also contribute an extra $5, 500 this year if you choose to do so. This is called the catch-up contribution for older contributors and your employer is not required by law to allow you to participate. If you want to do this, ask your employer if it is an option for you. These 401K maximum contribution guidelines do not concern any money that your employer may be adding to your account. Most employers will match the amount you contribute at least partly, and that amount is not included toward your maximum contribution amounts. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Get in depth information on 401K, 401K Rules, 401K Rollover, 401K Information and more. Go To 401K Information Now! |