2010 is coming and many have been wondering if 401k contribution limits would increase, decrease or stay the same. For those that have taken steep losses in their retirement accounts, maxing out their 401k, either traditional or Roth, is one of the only ways to try and get their portfolio back to respectable levels.

Many still my perceive the 4o1k purely as a money trap, but there is no other retirement vehicle that allows you to defer as much as the 401k. (You can obviously take advantage of the 401k counterparts 403b and 457 plan)

2010 401k Limits Unchanged

For the 2010 the 401k limits remain at the 2009 levels of $16,500.  While many might be upset that the levels didn’t increase like they did last year, one must consider that the potential for the limits to have been reduced was almost a reality.  This is in part because 401k limits are based on the increase of cost of living from one year to the next and 2009 saw these levels decrease.

Catch Up Contributions Remain Same, Too.

Catch Up Contributions

For those that got a late start saving for their retirement, the 2009 401k contribution limits have increased the “catch up” provision as well.  For those over the age of 50, you are allowed the $16,500 plus a “catch up” of $5,500 for a total contribution of $22,000.  For all the procrastinators out there, this gives them an excellent opportunity to grow their retirement nest egg to a respectable level.

Recap of 401k Limits

How Do You Change Your Contribution Amounts?

For those that are already maxing out your 401k contributions, you may want to double check with your benefits department to ensure that it continues. You may have to manually increase it to make sure that it happens. If that’s your plan, go ahead and change it immediately to make sure that don’t put it off too long into the new year.

There are no doubts the rules for qualified retirement plans such as 401k plans are complex. Your plan administrator should have documentation outlining the rules that apply to your particular employer’s plan. That document should explain these limitations as well as other rules or regulations that might apply.

Check here for Roth IRA and Traditional IRA Limits for 2010.

photo taken by Jason York Photography

Securities offered through LPL Financial, Member FINRA/SIPC