Increased 2009 401k Contribution Limits

In developing a plan for my 2009 goals, I stumbled upon some changes to the 401k contribution limits in 2009. I currently don’t participate in my company’s 401k, but I set up a Vanguard Individual 401k for my self-employed income. Depending on my level of self-employed income in 2009, the following changes may affect my maximum contribution amount.

2009 401k Contribution Limits

The 2009 salary deferral contribution is limited to $16,500 if you’re under 50. If you’re over 50, the 2009 salary deferral contribution is limited to $22,000 ($16,5000 plus a $5,500 catch-up contribution). This results in a $1,000 increase in the salary deferral contribution and a $500 increase in the catch-up contribution when compared to 2008.

Total contribution limits also increased for 2009. If you’re under 50, total annual contributions (salary deferrals and employer contributions) max out at $49,000, which is increased from $46,000 for 2008. If you’re over 50, total annual contributions max out at $54,500, which is increased from $51,000 for 2008.

Individual 401k Maximum Contribution Limit

My Individual 401k maximum contribution limit is roughly calculated in the following way (for a sole proprietor under the age of 50):

  • If you’re net income is less than the salary deferral contribution limit ($16,500 for 2009) you may contribute your entire income reduced by 1/2 of your self-employment tax.
  • If your net income is greater than the salary deferral contribution limit, you must calculate your net compensation.
  • Net compensation is net profit from IRS Form 1040 Schedule C with 1/2 of your self-employment tax removed.
  • As a sole proprietor, you may contribute up to 20% of your net compensation in addition to the salary deferral contribution with a maximum value of $49,000 in 2009.

A plan contribution calculator from Vanguard can be found HERE.


Although I doubt I will earn enough self-employed income to reach the salary deferral limit, it’s always good to know what the limit is so you can plan accordingly. Between maxing my Individual 401k and my Roth IRA contributions, I have a lot of work ahead of me for 2009.

For another resource on the new 2009 401k contribution limits:

Increased 401k Contribution Limits in 2009 by Cash Money Life.

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2 Responses to Increased 2009 401k Contribution Limits

  1. Tom Ungpiyakul says:

    Thanks for the information. You explain it better than anything that I read so far. Now I understand it better than before. Thanks.

  2. Thanks,i love this blog.The most convenient way to use 401K as a real estate funding tool is to apply for a loan against 401K.But Successful real estate investors seldom use their own fund for real estate investment. You should use little or none of your personal amount while investing in property. Using 401K loan in real estate investment is a good bet, because after closing off the deal, you will get back the amount. Paying off the loan including interest, without affecting 401K becomes much easier by this method.

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