President-elect Barack Obama has already spojen out about minor changes, such as temporarily allowing penalty free early withdrawals for those who qualify and suspending requirements for mandatory annual withdrawals for individuals 70 1/2 and over. However, this still doesn’t give a solution to increasing the safety and providing a decent rate of return for a worker’s retirement plan. We will have to wait to see what the new Democratic regime has up their sleeves.
While these issues are still being working out, think about maximizing your 401(k) contributions. Times are tight, but every little bit you manage to contribute could go a long way down the road. Valuations are low, and the potential for a recovery at some point is high. It’s in your best interest to continue saving for your Golden Years now more than ever.
Be aware that there are annual contribution limits for whatever type of retirement account you choose. Because of the tax advantages IRAs offer, it’s often best to make the maximum annual contribution.
In 2008, the IRA contribution limit limit for those age 49 and under is $5,000, while those 50 and above are $6,000. After this year, the contribution limit will rise in $500 increments, depending on the level of inflation. If you’re contributing to both types of IRAs, your total contributions between the funds can’t exceed the limit.
For 401(k)s, the contribution limit is $15,500 for those 49 and younger. For those 50 and older, the limit is $15,500, plus an additional $5,000 catch-up contribution. You plan administrator should have written information about your specific plan explaining any other limitations and regulations.