2009 Retirement Plan Contribution Limits

The IRS has announced the cost of living adjustments applicable to dollar limitations for 401(k), profit sharing, IRAs, and other retirement plans in 2009. The new limits are as follows:

-401(k) limit will increase from $15,500 to $16,500.

-401(k) “catch-up” limit for individuals age 50 and over will increase from $5,000 to $5,500.

-Defined contribution plan limit will increase from $46,000 to $49,000.

-Defined benefit and cash balance plan annual benefit limit will increase from $185,000 to $195,000.

-Contribution limit for benefit and contribution calculation will increase from $230,000 to $245,000.

-Highly compensated employee definition will increase from $150,000 to $110,000.

-Key employee compensation definition will increase from $150,000 to $160,000.

-Simple plan contribution limit will increase from $10,500 to $11,5000. “Catch-up” contribution remains $2,500.

-IRA and ROTH IRA contribution limit will remain the same at $5,000, and the “catch-up” limit will remain $1,000.

-In 2009, married individuals who file jointly can contribute $5,000 ($6,000 if 50 or older) to a Roth IRA if their modified adjusted gross income (MAGI) is below $166,000. If their MAGI is between $166,000 and $176,000, then they can contribute some amount less than their full limit. If their income exceeds $176,000, they are not eligible to contribute to a Roth IRA for 2009. In 2008, this phase-out range is $159,000 to $169,000.

-For single individuals, the Roth IRA phase-out limit is lower: $105,000 to $120,000 for 2009. In 2008, a single individual’s income restriction is between $101,000 and $116,000.

An independent, NAPFA – registered CFP can clearly illustrate how these adjustments effect your financial planning efforts.