In 2010 IRS could cut 401(k) contribution limit to $16,000

[question everything]

In 2010 IRS could cut 401(k) contribution limit to $16,000
By Sandra Block, USA TODAY

http://www.usatoday.com/money/perfi/retirement/2009-08-26-401k-contribution-limits-irs_N.htm

Low inflation has made food and gas more affordable during the recession, but there's a downside: Social Security beneficiaries probably won't get a raise next year, and the IRS may reduce the amount workers can contribute to their 401(k) plans.

The IRS will announce 2010 contribution limits for 401(k) plans in October, based on a formula tied to the inflation rate in the third quarter vs. the year-ago quarter. For 2009, most workers can contribute up to $16,500 to their 401(k) plans, plus an additional $5,500 if they're 50 or older.

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Yes, I know, most do not contribute the maximum and many employers have suspended their matching contributions. But with the value of so many retirement funds dropped, why limit the contribution? With so few pensions around, with the future of Social Security in doubt, why limit the contributions?

[Mari333]

1. we have 2 bullshit illegal WARS to wage and fund,!! so

FUCK the old people, right?

[spinbaby]

2. I wish I could contribute that much

Or had that much to conribute.

[question everything]

3. I know. But think about it this way: the more people can contribute

that much and save, the less they will need help when they retire and the more will be available for the ones who really need help. At least, one hopes.

Of course, I still think that Social Security should not be a separate line item on either our taxes or our expenses. It should be integrated into our income tax system and than be distributed on as need basis.

I don't see why millionaires like, say, Bill Gates, should get a single penny from Social Security. But, hey, he "contributed" to the funds.

[Statistical]

4. It won't hurt most people.

I contribute $8,000 and I think that is more than 90% of people do.

I put money in my IRA over 401K because the investment choices suck in mine (as most) 401K.
When I change jobs I roll over the 401K into my Roth IRA so my 401K is merely a placeholder until I change jobs.

[Oregone]

14. It wont hurt anyone

Anyone that can contribute more than $16000 a year wont exactly be "hurt" if they cant write some of it off.

[DrDan]

5. saving is bad for the economy

heard this morning that Americans are now saving around 7% - (which sounds high to me). But . . . our economy is based on spending.

Go to the mall. Buy a new car. Spend. Spend. Spend.

[Statistical]

8. It is ironic huh

Too much saving is actually bad for the economy especially now.

Now I personally am saving a LOT more than 7% because of an uncertain future.

However as a collective unemployment has risen about 8%. So if every American spent 8% more than they did in 2007 the economy would be well recovered by now.

Economist call this the "failure of the individual".

When times are "bad" people cut back for personal reasons however that causes companies to cut back which means more unemployment which means less spending, more fear which leads to lower prices, tighter margins, more unemployment, more fear, more cutting back etc...

The problem was Americans weren't saving in the good times. If in 2007 Americans were saving 7% then when the economy slowed down they could have spent more helping to keep it afloat.

The real issue....
why weren't Americans saving in 2007? Easy wages have been flat for last 20 years so to keep the same lifestyle in the face of inflaiton Americans spent 3% more every year (saved less) until they were spending more than their wages (credit cards, HELOC, debt).

Wages need to increase. It is good for business to have a "richer" consumer base.

[DrDan]

10. I agree - we tend to base our saving-spending decisions based on our personal

day-to-day (maybe moonth-to-month) positions. A few extra bucks back in the good times sent many scurrying to buy new cars - cars they probably could afford then, but not now. A poor basis for deciding whether to buy a car or a new house.

We Americans care little about long-term vision or planning. Same is true with corporations. All decisions are based on the all-sacred quarterly reports - vs long-range plans.

We are certainly paying the price. I really feel sorry for those who have not put a systematic savings plan in place. It is not about how much you have saved over the years - but how much you saved and how you have that savings working for you.

[Statistical]

12. Also getting use to saving gives you cushion.

Savings is not a choice for me it is an expense like anything else. Most of it is automatic and I don't miss the money.

So in bad times (if I lot my job) me & my wife could cut savings rate to 0% to avoid financial collapse.

The people who were using debt to keep up with the Jones in the boom years (i.e. living beyond their means in the best of times) they have no slack. Anything, even a slight or temporary disruption in income can crush them.

[DrDan]

13. we have migrated to a reward-now society

enjoy the money now - save later.

However, if you save a million dollars over a 20 year period and another saves a million in the last year of working - your estate will be worth considerably more. This fact seems to have been lost on most workers.

Also - I never could understand why anyone would not contribute max to a 401K - particularly in the age of employer match. Free money. PLUS the tax break. So one saves say 20% - but the net is MUCH higher considering the tax break and the match.

One of the most embarrasing things I have ever witnessed. A peer and I went Christmas shopping one lunch hour. He saw a watch he wanted to buy for his wife. He went through 3 credit cards before he finally found one where he still had some bandwidth left to handle the purchase - and this was a modest watch. It is just crazy how Americans love their credit cards. I think they are a terrific tool - if kept in check. NEVER EVER pay anything less than the full balance. And NEVER EVER be late. But not the vast majority of Americans - just crazy.

[Statistical]

15. I was like that guy (sad)....

Until one day I accepted reality and began the slow and painful process of paying down all my credit card debt, then auto debt, and now working on student loan debt. The goal to have no debt except mortgage by 2015.

[question everything]

16. And charge charge charge

and don't pay in full so that you can pay 19.99% interest, perhaps even be hit with late fees.

[azmouse]

6. People who contribute the max to their 401K accounts

also have other means of investing.
The money my husband and I can't put into a 401K we'll send to our investment advisor to put into our accounts there.
It's better to be diversified.

[vadawg]

7. yup i agree, after my 401k is maxed, i too put money elsewhere

the old to many chickens in one basket analogy holds especially true with retirement savings.

[emsimon33]

9. How many people make enough to put in more than $16,000?

We need to get back to a tax structure that is pre-Reagan!

[RUMMYisFROSTED]

19. Appx 15% of Americans don't even make $16k a year.

That's the real "worry."

[emsimon33]

21. Yes, this would be a tax on the very rich and the better off

I am all for it. We also need to have not cap on paying into Social Security and we need to tax income over $5 million at 80% or higher as we did 40 years ago when our economy took off.

[Davis_X_Machina]

11. Why limit the contribution? You can save in a number of ways..

...but 401k's are tax-advantaged, and we're presently running something of a deficit.

[DrDan]

17. because to encourage more saving is to reduce spending

and that hurts the economy.

We do not have a government that supports saving.

[Egalitariat]

18. They've got to pursue every dollar they can***

[ddeclue]

20. Ummm..SO??

98% of Americans will never even get close to that limit.

[roamer65]

22. I'm sure they'll soon require 20% of 401K contribs to be in US gov't bond funds.

That is another way to get at the money.