IRS Maximum Allowed 401k Contribution Increases in 2009

Update: the 2010, 2011, 2012, 2013, 2014, 2015, and 2016 401K maximum contribution amounts have now been released since this post was written. What follows is for 2009.

The IRS maximum allowed 401K contribution will increase from 2008’s $15,500 to $16,500 in 2009 (for those over 50 years old, the 401k catch-up contribution increases to $22,000). If you’re looking for other years, here are updated posts and maximums for you.

What Does this Mean for you?

If you are privileged enough to be able to max out your 401K in 2009, and you dollar cost average your contributions over the entire year, you may need to adjust the percentage that you contribute per pay period from your 2008 levels.

How do I calculate how much I need to Contribute to Max out my 401K in 2009?
maximum 401K contribution

Simply take $16,500 divided by your total salary. For instance, if you make $50,000 per year (including bonuses), then take $16,500/$50,000. You end up 0.33 or 33%. In this instance, this means that you would have to work with your HR department or more likely, your 401K administrator, to change your contribution to 33% of each paycheck in order to max out your 401K for the year.

Why is Right Now a Good Time to Change my 2009 401k Contribution?

The reason I tell you now is because often times it takes at least a full payroll cycle before your new contribution % takes effect and for a lot of people that means they’d have to change right now if they want the new % to take effect by Jan. 1. Of course, you can change your contribution % multiple times at any point during the year – but for those who want to set it and forget it for the year, right now is the time.

For those who can AFFORD to do it, maxing out your 401K can rarely be seen as a bad strategy. If your employer matches you up to the max, it may especially be to your benefit to take advantage of the free money.

401K Contribution Discussion:

  • Did you max out your 401K this past year?
  • Do you plan on maxing out your 401K in 2009? 2010
  • Does your employer match up to the max, or only to a certain lower percentage? If lower, what percentage?

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