2011 Retirement Plan Contribution Limits

The IRS has announced the retirement plan limitations for 2011.


2011 Contribution Limits
401k - $16,500
Roth IRA - $5,000 if Modified Adjusted Gross Income below $107,000 ($169,000 if married filing jointly)

2010 Contribution Limits
401K - $16,500
Roth IRA - $5,000 if Modified Adjusted Gross Income below $105,000 ($167,000 if married filing jointly)

Pay Period Leap Year

2009 is a pay period leap year at my company. We will have 27 pay periods instead of 26. The company did not adjust the bi-weekly pay, which means that we will effectively receive a pay increase this year. So far HR has not communicated anything to the employees or taken any credit for it.

I had calculated my salary deferral to have my 401k contributions maxed out on the 26th pay period. I will therefore miss out on the 4% company match on that extra 27th pay period.

The pay period leap year happens every 11 years. I’ll have to remember to be more careful in calculating my 401k salary deferral in the year 2020!

2010 Retirement Plan Contribution Limits

The IRS has announced the retirement plan limitations for 2010. The limitations of interest to me remain unchanged for 2010.

2010 Contribution Limits
401K - $16,500
Roth IRA - $5,000 if Modified Adjusted Gross Income below $105,000 ($167,000 if married filing jointly)

2009 Contribution Limits
401k - $16,500
Roth IRA - $5,000 if Modified Adjusted Gross Income below $105,000 ($166,000 if married filing jointly)

2009 Retirement Plan Contribution Limits

The IRS has announced the retirement plan limitations for 2009.

2009 Contribution Limits
401k - $16,500
Roth IRA - $5,000 if Modified Adjusted Gross Income below $105,000 ($166,000 if married filing jointly)

2008 Contribution Limits
401K - $15,500
Roth IRA - $5,000 if Modified Adjusted Gross Income below $101,000 ($159,000 if married filing jointly)

My 401k Asset Allocation for 2008

As you can see, I am keeping it simple. I have rebalanced my portfolio and picked 4 new funds in the new platform that have performed well in the past 10 years (or since inception).

This asset allocation is 25% international, 25% large cap, 25% mid cap and 25% small cap.

This is a highly aggressive portfolio which will suffer significant drawdowns in a market downtrend, but also should easily outperform the S&P500 in a market uptrend. Since I am dollar-cost averaging into these funds and do not plan on touching any of this money for at least 20 years, a market downtrend only means I am buying more shares for the same amount of money. What matters is that 20 years from now, the market is higher than where it is now.

401K moving to a new investment platform

My company announced today that our 401K will be moving to a new investment platform. Out of the current 29 investment options offered, 21 of them will be eliminated and replaced with 18 new ones. The company is putting a positive spin on the change: “These changes are being made so you may select from a more diverse and competitive fund array“. Even though there are slightly less investment options to choose from, I guess it is possible that the new ones are more diverse and more competitive…

My current asset allocation is 25% International, 25% small cap, 25% mid cap and 25% large cap. My international fund remains in the new platform. I have until December 10th to choose 3 new funds for the other categories.

One mistake to avoid while maximizing your 401K

I almost made a major mistake in the process of maximizing my 401K: not properly adjusting my deferral amount for the last quarter of the year. The main advantage of a 401K is the company match which equals to free money. My company matches each dollar I contribute up to 4% of my pay. If I don't contribute, there is no match. Therefore it is crucial to be contributing on all 26 paychecks with each of my 26 contributions being at least 4% of my pay to get the full company match. If I were to reach the $15,500 contribution limit prior to the last paycheck, I would lose out on the company match.

Because I receive compensation pay for working week-ends and for traveling throughout the year, I never know exactly what my end-of-year salary is going to be. Every quarter end I have the opportunity to change my deferral amount. So every quarter I must re-calculate my deferral amount to make sure I will not reach the contribution limit prior to the last paycheck. At the end of September I must calculate my deferral amount one last time to make sure the $15,500 limit is reached on the last paycheck of the year. And I can only estimate how much compensation pay I will receive during the last quarter.

All this could be made real simple if I could specify a fixed amount as a contribution: $15,500/26 is all I need to contribute every paycheck. Alas, my company is making it a bit more interesting by allowing only to specify a percentage of pay as a contribution, and not a fixed amount. I wonder if this is the same for all other 401K plans out there or if it is just one of my company's quirks.

2007 Retirement Plan Contribution Limits

2007 represents the first time I would have maximized my contributions to both my 401K and my Roth IRA. I will try to make it a habit from now on.

2007 Contribution Limits
401K - $15,500
Roth IRA - $4,000 if Modified Adjusted Gross Income below $99,000

2008 Contribution Limits
401K - $15,500
Roth IRA - $5,000