IRA, 401(k), and HSA Contribution and Funding Limits for 2009
First, analyze your options if your employer has stopped matching 401(k) contributions.
Third, understand the limits on what you can contribute and what your employer can contribute to your 401k retirement plan in 2009:
Maximum employee 401k contribution = $16,500 plus $5500 catch up contribution (if you are over 50) for a total of $22,000.
Maximum employer contribution is 25% of compensation, up to a maximum total employee + employer contribution of $49,000. This maximum increases to $54,500 if you are over 50.
The employer 401k plan contribution can be any combination of matching funds and profit sharing contributions. For you baby boomers who own a small business, anything over the safe harbor 401k contribution limit of $16,500 ($22,500 for over 50) may be subject to top-heavy plan analysis, so be sure to get some professional advice if you want to include additional company funds into your personal 401k account, over and above the safe harbor limit.
Fourth, consider whether any of your 2009 401(k) funding should be Roth 401k contributions, if your employer’s plan permits that.
Fifth, understand the limits on what you can contribute to your traditional, Roth, or non-deductible IRA in 2009:
Maximum contribution to an individual IRA = $5,000 plus $1,000 catch-up contribution for a total of $6,000.
Sixth, if you have a Health Savings Account, consider whether you want to use your HSA as a tax-free retirement investment. For 2009, the HSA contribution limits are:
$3,000 for individual coverage
$5,950 for family coverage
Plus a $1,000 catch-up contribution if you are 55 or older.
Seventh, don’t forget that you have until you file your 2008 income tax return to make your 2008 contributions to an IRA. Similarly, your employer can make additional 401k contributions to your account up until the time it files its corporate tax return.
For many boomers, there are a lot of issues to consider in making decisions on funding one or more retirement plans. Be careful, be smart, and don’t procrastinate.
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