Anyone else bummed the 401K limit in 2008 didn't change?

[wilkens21]

So it's staying 15.5 for now for folks under 50, and I think gov't will decide in '09 whether to raise it by 500 increments depending on their view of inflation.

My guess is it'll be 16K in '09, but for whatever reason we have no idea til probably Q3 or even Q4 of next year.

Oh well

 

[ChemEng]

Im still working on getting it back up to the limits after starting a Roth and having a baby. So it isnt really bothering me that much (unfortunately).

 

[Niko]

Im still working on getting it back up to the limits after starting a Roth and having a baby. So it isnt really bothering me that much (unfortunately).

Same here. Actually, I was a little happy to see it stayed at 15,500, know that it's hard enough for me to hit that!

It's interesting, before the IRS released the 2008 limits, I saw it widely reported that it would go to 16K.

 

[martyb]

OK with me for now that it didn't go up. I'll turn 50 in January, so I'm starting out the New Year maxing out plus the $5k catch-up contributions. My DW upped hers to 20% of income, so between both our 401Ks (mine's actually TSP govt. version of 401k) we're about tapped out. Until we sell the house, that is. Hopefully that will happen soon enough for us to max out ROTH IRA's for both '07 and '08.

 

[wilkens21]

I just checked and actually the IRA limits are still up in the air for '09 as well. It'll be 5K for the time ever for the "younger" folks. But we may see that get upped to 6K eventually as well.

 

[W2R]

Yes, I'm bummed. But there it is.

I had hoped that the 401K limit would be $16K, and the Roth IRA limit would go up to $5500. I had also hoped that the over-50 catch-ups would increase. If wishes were horses, beggars would ride, I suppose.

I'll just have to put the extra money into taxable. I'll have more choice about the investments in taxable anyway, so that should help a little (eventually).

It's interesting, before the IRS released the 2008 limits, I saw it widely reported that it would go to 16K.

That was odd, wasn't it! The group that conducted our Federal Employees Retirement Training seminars last fall actually informed us that the maximum contribution to the TSP for 2008 would be $16K. That day, the TSP website added the information that it would be only $15.5K. I think that the IRS is supposed to increase it by the CPI-U, and then rounded to the nearest $500, or something like that. Must have been close.

 

[Niko]

That was odd, wasn't it! The group that conducted our Federal Employees Retirement Training seminars last fall actually informed us that the maximum contribution to the TSP for 2008 would be $16K. That day, the TSP website added the information that it would be only $15.5K. I think that the IRS is supposed to increase it by the CPI-U, and then rounded to the nearest $500, or something like that. Must have been close.

Just a few days before the IRS released the limits, I was in a meeting at work. We were discussing changes to our company's 401K plan along with our company's TPA and financial advisors. Someone said that the 2008 limits were still up in the air. I had just read someplace on the internet that it was going up to 16K. So I (foolishly in retrospect) told this group of 15-20 that it was just announced that the limit was going to 16K. Everyone, including the FAs in the room, believed me -- for a few days!

 

[bssc]

Add me to bummed. However, I will max out on my HSA next year so I will have another $2900 a year socked away. And all I need to do is write checks to cover my healthcare needs.

 

[Texas Proud]

Put me down as a 'so what'.... to me getting the catch up was the big thing this year... another $500 is not going to make or break me at all... considering it only save less than $150 in taxes.

 

[Bimmerbill]

I'm still working on hitting the 15.5k max. I am at 18% of salary and things are tight with heating oil and gas so expensive. My daughter is 22 months, but hasn't cost us too much due to lots of hand me downs and shopping at the consignment stores.

I hope to hit the max as my salary increases...

 

[growing_older]

I too would have been happy if the limits were raised. But I'm also confused about why they are the way they are. For instance, why is it that age 50 and older limits are 5k higher? If it's okay for them, why not okay for younger workers who have a longer time to let that money grow? With all the stats about low savings rate, why not raise all these limits to give people more incentives to save? Wouldn't that encourage more LBYM behavior or are we so dependent on consumer overspending that that would be bad?

 

[wilkens21]

I think it's fair for the 50+ baby boomer to get that 5K extra because the 401K plan really came into play in the 80's (I think), so it's NOT really fair for a gen X'er (or later), which I am - can get a 401K for our first job, and folks who've slaved for years before us didn't.

It's a chance for them to catch up a bit and it's fair. To me they should get a 10K/year bump rather than 5K, but that's just me...

 

[Andre1969]

I'm a little bummed that the limit didn't go to $16K, but I think I'll survive. 2006 was the first year I hit the federal limit, which back then was $15K. I get paid every other week, and hit the limit in the 25th pay period, so for the 26th pay period I got a pretty nice check!

In 2007, I hit the $15.5K limit in the 24th pay period, so that paycheck was a little bigger than normal, but the 25th and 26th paychecks were sweet indeed.

I guess one nice benefit of the limit not being raised for 2008 is that I'll hit the $15.5K mark even earlier, since I make more money now and will (hopefully) get a raise on July 1. Plus, with some overtime thrown in, I figure this year around I might get 4 or 5 paychecks at the end of the year that are inflated, since no 401k contributions are taken out. That really helps around Christmas time.

 

[jblack]

I had been hoping that the limit would go to $16k. DW and I are still in our early 30s and need every tax-deferred $ we can get.

 

[Texas Proud]

I'm a little bummed that the limit didn't go to $16K, but I think I'll survive. 2006 was the first year I hit the federal limit, which back then was $15K. I get paid every other week, and hit the limit in the 25th pay period, so for the 26th pay period I got a pretty nice check!

In 2007, I hit the $15.5K limit in the 24th pay period, so that paycheck was a little bigger than normal, but the 25th and 26th paychecks were sweet indeed.

I guess one nice benefit of the limit not being raised for 2008 is that I'll hit the $15.5K mark even earlier, since I make more money now and will (hopefully) get a raise on July 1. Plus, with some overtime thrown in, I figure this year around I might get 4 or 5 paychecks at the end of the year that are inflated, since no 401k contributions are taken out. That really helps around Christmas time.

Do you lose matching if you do this At my company, they only match 5% on each paycheck.... if you hit the limit early, no more match... so you MUST spread it out over the full year.

You lose your 'bonus' checks, but do get more on each one during the year.

 

[Andre1969]

Do you lose matching if you do this At my company, they only match 5% on each paycheck.... if you hit the limit early, no more match... so you MUST spread it out over the full year.

You lose your 'bonus' checks, but do get more on each one during the year.

My company gives us 3% on each paycheck, but they do that whether we invest or not. So even though I hit the $15.5K employee limit on the 23rd paycheck, my company still puts in the 3%. I guess if they just matched my contribution up to a certain point I'd have to watch it, though.

Another thing that's cool is that they also do that 3% on any overtime I work. I imagine that many companies would stop it after 40 hours per week.

 

[RobertInOhio]

I was always confused as to why there are limits on these accounts in the first place. Rich people are not going to use 401ks to save for their retirement and most people cannot afford to put in the max a year anyway, regardless of what it is.

I'll never use one since my company forces me to invest in "something". Why can't it be an high interest bearing account instead of gambling it away in the stock market?

 

[WanderLuster]

Just had to go check my plan notes.

We get a 100% match on the first 5% of eligible compensation which includes OT pay and bonuses. (Which would be really great if I actually got a bonus). I just began getting a match this month -- definately a little extra incentive to keep working those OT hours.

 

[Niko]

I'll never use one since my company forces me to invest in "something". Why can't it be an high interest bearing account instead of gambling it away in the stock market?

You should double check this. Every 401K plan I've seen offers at least some sort of "safe" investment (eg - cash or equivalent). 401K trustees are worried about liability and typically offer a cash alternative. Even if there's no cash alternative, most plans have a "conservative" (or target retirement 2010) plan that is substantially invested in bonds and fixed income. If you were truly forced to put your 401K investments substantially in the stock market, I would think that your plan trustees might be open to liability.

 

[wilkens21]

I agree with Niko, there should be some "stable" fund, which is what I have in my company's plan. It's actually called the "Stable" fund for me.

Supposedly they invest only in cash reserves + the most stable of bonds, so that there won't be wild swings of your 401K money.

 

[sunshine]

I'm like millions of American workers...the 401K plan offered limits my contribution to 25% of gross...this is less than the 15,500 so raising the limit wouldn't help me.

The extra 5K catch-up for those over 50 also doesn't help any because the limit of 25% gross pay is still in effect keeping max contributions well below the Federal limits.

 

[dmpi]

I'm supprised the limit didn't go up. I thought it was suppose to be indexed to inflation. However, I did notice the SSI cap went up to 102K. Bummer.

 

[boilerman]

I'm a little bummed that the limit didn't go to $16K, but I think I'll survive. 2006 was the first year I hit the federal limit, which back then was $15K. I get paid every other week, and hit the limit in the 25th pay period, so for the 26th pay period I got a pretty nice check!

In 2007, I hit the $15.5K limit in the 24th pay period, so that paycheck was a little bigger than normal, but the 25th and 26th paychecks were sweet indeed.

I guess one nice benefit of the limit not being raised for 2008 is that I'll hit the $15.5K mark even earlier, since I make more money now and will (hopefully) get a raise on July 1. Plus, with some overtime thrown in, I figure this year around I might get 4 or 5 paychecks at the end of the year that are inflated, since no 401k contributions are taken out. That really helps around Christmas time.

So your company stops your contributions when you hit the IRS limit? Mine doesn't, it just converts your contributions to be post-tax instead of pre-tax. I contributed about $22K last year to my 401K, about 7K over the limit. The company continues to do its match even after I hit the pre-tax limit.

Do most others max out at $15.5K and then open some sort of IRA? Or just stop contributing and enjoy the "raise"?

 

[Notmuchlonger]

I'm supprised the limit didn't go up. I thought it was suppose to be indexed to inflation. However, I did notice the SSI cap went up to 102K. Bummer.

Yep, dont really get it either. Unless it is rounded up by 500 $ increments and it was just a bit under.

 

[aaronc879]

So your company stops your contributions when you hit the IRS limit? Mine doesn't, it just converts your contributions to be post-tax instead of pre-tax. I contributed about $22K last year to my 401K, about 7K over the limit. The company continues to do its match even after I hit the pre-tax limit.

Do most others max out at $15.5K and then open some sort of IRA? Or just stop contributing and enjoy the "raise"?

There's a max of $15,500. It has to be spread out through out the entire year or you lose the company match after you hit the max and stop making contributions. I don't mind the 15,500 max though because I only make about $44K. If the max was higher I would still want to max it out but in doing so would have virtualy zero discretionary pending.