401K Maximum

So back in September I blogged about how the 401k saves you money. Today I was routinely checking my online earnings statement that I receive from work and to my surprise I have achieved the annual limit ($15,500) for 401k contributions in 2008!

I did a bit of Google research on the internet and found that they are increasing this limit to $16.5k in 2009. I then became curious about how close I was to the limit each year so I researched what the maximum was for each year since I started working in 2001. Here is that list:

2001 - $10,500
2002 - $11,000
2003 - $12,000
2004 - $13,000
2005 - $14,000
2006 - $15,000
2007 - $15,500
2008 - $15,500
2009 - $16,500
2010 - $16,500

Keep in mind that this excludes any matching contributions from your employer, which is maxed out at 6% of your wages. For example Tom makes $50,000 in 2003 and contributes 24% or $13,000 to his 401k to achieve maximum value. His employer also contributes 6% of his wages or $3,000 towards Tom's 401k. Therefore Tom has a total of $16,000 in his 401k at the end of year 2003.

Even though the market has utterly destroyed my 401k this year, overall returns for the life of my 401k still sits north of 20% of the original cash contributions. This further proves my point that 401k saves you more money in the long run than any other investment vehicle.