The IRS plans to announce 2010 contribution limits for 401(k) plans this month, and employees might not like what they hear.
Contribution limits are based on a formula tied to the third-quarter consumer price index. In 2009, most workers can contribute up to $16,500 to their 401(k) plans, plus an additional $5,500 if they're 50 or older. But - according to reports - if inflation ticked up during September and August, the IRS could be forced to reduce the cutoff to $16,000 in 2010, and people 50 and older could see their contribution limits fall from $22,000 to $21,000.
Unless Congress changes the law, retirement experts say the move will stir fierce political backlash from workers, who are showing signs of aggressive saving. For the first time in a year, more workers increased the amount of money they put into their 401(k) accounts during the second quarter than decreased their contributions, according to a report issued by Fidelity Investments. The average 401(k) account balance rose 13.5 percent in the second quarter to $53,900.
