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.
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