2009 401k Limits

The 401k limits have increased this year to $16,500 up from $15,500 last year.  Starting in 2010 the limit placed on a 401k will be indexed with inflation in increments of $500.  This applies to the majority of the population.  However, if you are age 50 and older you qualify for "catch up" contributions which amount to $5,500 above and beyond the normal limit.  That puts the cap at $22,000 for 2009 for those that are age 50 and greater.

If your employer matches any money that you put into your 401k this does not affect your yearly maximum.  This will be above and beyond any maximum that you yourself are tied to.  Therefore if your company matches the first $3,000 you put into your 401k and you are older than 50 years old, you would still be able to put in your yearly maximum of $22,000 and your employer would top that with $3,000 for a total of $25,000. 

This of course varies by each individual's situation.  In general it is good practice to put into your 401k whatever your employer will match.  If they match 50% on the first 5% you put in, then make sure to put 5% in.  You would be throwing away money so to speak if you did not.  However, after that there are a few paths to go.  If you qualify for a Roth IRA and still want to put more money towards retirement I would suggest maxing that out prior to putting any more money into your 401k.  This will be very beneficial come retirement as the distributions will be tax free.  From there it comes down to whether you would like to continue putting money into your employers 401k plan or to go with a traditional IRA with an outside company.  Many outside companies allow far greater flexibility than what is normally found inside a 401k plan so it does help to do some homework.