Due to low inflation, there’s a possibility that the maximum amount workers may contribute to their 401(k) plans might be reduced. The 2009 401(k) contribution limit is $16,500 for workers under 50. Those 50 and over can contribute an additional $5,500 for a total of $22,000.
Many expect that the limit for 2010 will fall to $16,000 for those under 50. (Those 50 or older would be able to contribute up to $21,500.)
In and of itself, the reduction is not a good thing. The precious few over-achievers saving the maximum each year will not be able to squirrel away in their 401(k) as much in 2010 as they did in 2009. But let’s be realistic, those who are saving at the maximum are not those facing the biggest looming crisis in their retirement – it’s those saving a lot less who are likely facing big financial hurdles down the road. Furthermore, if you want to save super big-bucks, the $500 decrease isn’t going to make a big difference anyway – you can still save an unlimited amount of money outside of your retirement plans.
For those who have never saved an amount approaching the maximum, your responsibility is both clear and unchanged: save more. Don’t use the upcoming media coverage discussing the lowered limits as an excuse not to raise your contribution level. It’s not going to matter. With frugality currently in vogue, now’s a pretty good time to move forward.