Retirement account contribution limits for 2009

IRS has published the following contribution limits to retirement plans for 2009.

The maximum pre-tax contribution allowed to 401(k) and 403(b) accounts for 2009 is $16,500, which is $1000 more than it was for 2008. Those who are over 50 are allowed to contribute an additional $5,500 in "catch-up" contributions. This is $500 more than it was for 2008.

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 the same as for 2008 ($5,000). The contribution limit for those over 50 is also the same as before ($6,000).

To be eligible to fully contribute to a Roth IRA, your adjusted gross income (AGI) must be under $166,000 (increased from $159,000 for 2008) for taxpayers filing a joint return. For single taxpayers, the AGI limit is increased from $101,000 to $105,000.

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Net Worth Update - 2008 Third quarter: Down 5.7%

It is probably unwise to post a Net Worth Update with the daily fluctuations in the market right now, but our Net Worth at the third quarter of 2008 was $622,297.

Our Net worth decreased by $37,837 (or 5.7%) this quarter. The return on our overall portfolio for the quarter was a negative 8.7%. I calculated our portfolio return using a formula for calculating portfolio return I mentioned in a previous post.

As I mentioned in a previous post on our target asset allocation, we aim for a 75/25 portfolio (75% Equities, 25% Fixed income). The current downturn in the stock markets has tilted the balance to about 67/33. This provides a good opportunity to re-balance, so I will be doing that over the next couple of months, mainly by selling bond funds in our retirement accounts and buying stock funds instead.

I also intend to sell some of the funds in our taxable accounts before the end of the year to claim capital losses in this year's tax return. You can deduct up to $3,000 in losses against your income, and carry over any remaining losses to future years. You can buy back the same funds after 30 days, to avoid running into the wash sale rule.

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