According to a recent study issued by Vanguard Investments, 401(k) balances are higher now than before the market downturn. The study examined 1.7 million participant’s 401(k) balances between September 2007 and September 2009. 60% of those who kept a balance over the period had the same or higher balance than they had in October 2007, when the market peaked. The other 40% had lower balances, but most of these were less than 20% below their October 2007 peak. Something to remember when looking at this reporting is that it is tied down to a peak point, and many times this limited focus study does not take into account the long term views associated with retirement saving and retirement planning. Find out more information about a 401(k) or find the right Rollover IRA for your retirement.
Tag Archive for '401k'
From the AP – - After raising 401k contribution limits $1,000 to $16,500 for 2009, the IRS has just announced that 401k contributions will remain stable at that amount for 2010. The maximum contribution is established by using a formula tied to the third-quarter Consumer Price Index for all urban consumers — the CPI-U, which measures the average change in the prices of goods and services including food, clothing, shelter, fuel, drugs and other day-to-day items bought by U.S. urban consumers. This year the CPI-U fell 1.3 percent over the past 12 months. Accordingly and in theory, the IRS could have lowered maximum contribution limits; however, and luckily the law does not allow for a decrease in contribution.
The IRS also declared it was keeping many of last year’s tax deductions, some of which also are determined by inflation figures.
Several deductions for 2010 are unchanged and others change slightly. They include:
- The value of each personal and dependency exemption available to most taxpayers is $3,650, unchanged from 2009.
- The new standard deduction for heads of household is $8,400, up from $8,350 in 2009. For other taxpayers, the standard deduction remains unchanged at $11,400 for married couples filing a joint return and $5,700 for singles and married individuals filing separately. Nearly two out of three taxpayers take the standard deduction rather than itemizing deductions, such as mortgage interest, charitable contributions, and state and local taxes.
- Various tax bracket thresholds will see minor adjustments. For example, for a married couple filing a joint return the taxable income threshold separating the 15 percent bracket from the 25 percent bracket is $68,000, up from $67,900 in 2009.
- The annual gift tax exclusion remains unchanged at $13,000.
With 401k automatic enrollment gaining increased popularity in the past year, it appears not only are more employees increasing their retirement savings but also increasing U.S. savings by as much as $8 billion a year, according to the Retirement Security Project, an advocacy group partnered with Georgetown University and the Brookings Institute. Automatic enrollment allows employers to provide a 401k plan as a default; an employee must “opt out” of a 401k plan if they (foolishly) decide not to take part in it. According to the aforementioned organization, automatic enrollment could boost 401k contribution rates from 75% of eligible employees to as much as 95%. These stats are sure signs that 401k plans are getting spread across the board, but according to the Profit Sharing Council of America’s President David Wray, automatic enrollment “will be standard practice but not universal.” For example, large employers like Starbucks and FedEx have suspended their employee matches, but despite this fact it appears that 99% of employees have kept their 401k plans. To supplement the fact that more employees are signing up for a 401k plan, a recent Watson Wyatt study shows that 82.7% of eligible employees have balances in their 401k plans, up from 81.9% in 2007.
A recent milestone analysis of three million employees’ 401k plans in 57 top corporations conducted by Hewitt Associates and the non-profit educational foundation Ariel Investments shows that there are significant discrepancies in retirement planning and saving amongst different ethnic groups. The study shows that just 65 percent of Hispanic workers participate in their company’s 401(k), while 66 percent of African-American employees, 76 percent of Asians and 77 percent of whites enroll. Among them, Latinos contribute 6.3 percent of their income, whites 7.9 percent, Asians 9.4 percent and blacks only 6 percent. This study while at its façade displays how different races plan for retirement differently, underlines how there are many ethnic, social, cultural, economic, and linguistic barriers to receiving retirement information, planning, and saving properly for retirement.
A new Edward Jones report released this morning has some interesting details on parents saving for retirement and college for their children. The report says that a third of parents are saving equally for retirement and paying for college, a third are putting more money into one than the other and another third aren’t saving for either. To further analyze this data, the report states that younger parents (35-44) are more likely to save for both (37%) than those ages 55-64 (23%). This is interesting data considering retirement and paying for a child’s college education many times come around the same time. So remember that retirement savings are just one of many financial considerations when growing older.
In other news, in regards to a USA Today posting on 401(k)’s it seems that the IRS may just reduce the amount you are allowd to contribute to your 401(k) in 2010 to $16,000. This is truly upsetting news considering now is the time that people are going to have to put as much as they can back into their savings because they had to delve into during the recession. Let your Congressmen know that this should not happen, now is the time to save away for the future!
