As I detailed in earlier posts on our Net Worth, most of our retirement savings are in tax-deferred retirement accounts, mainly 401(k) and IRA accounts. We have been able to contribute the maximum allowed amounts to these accounts for the last six years, and it has served us well. One of our goals is to continue to "max out" contributions to these accounts.
Now that we are well into the fourth quarter, it is time to look ahead to 2008. IRS has just updated the contribution limits for retirement plans for 2008.
The maximum pre-tax contribution allowed to 401(k) and 403(b) accounts for 2008 is $15,500, which is the same as for 2007. Those who are over 50 are allowed to contribute an additional $5,000 in "catch-up" contributions. This is again the same as in 2007.
Note that this is the maximum allowed by IRS. Your individual plan may have additional restrictions that prevent you from contributing the full amount. It is important to check with your plan administrator.
For IRAs (both Traditional and Roth), the contribution limit is going up in 2008 to $5,000, which is $1,000 higher than the limit for 2007. The contribution limit for those over 50 is $6,000.
The good news is that this will allow us to contribute more next year. The bad news, of course, is that we'll have to try harder to find enough money to be able to afford the higher contributions.
To be eligible to fully contribute to a Roth IRA, your adjusted gross income (AGI) must be under $159,000 (increased from $156,000 for 2007) for taxpayers filing a joint return. For single taxpayers, the AGI limit is increased from $99,000 to $101,000.
- IRS announcement on contribution limits for 2008