Contribution Limits

       The maximum amount you can contribute to a 401(k) plan depends on your age. These are the correct 401(k) plan contribution limits for 2009 and 2010. This limit can be split between multiple qualified retirement plans (401(k), 403(b), SIMPLE, or SEP), but the combined total of your contributions cannot exceed this limit. You cannot contribute more than 100% of your compensation.

• Under age 49 at the end of the year: $16,500

 

• Age 50 or older by the end of the year: $22,000 (only if your plan permits catch-up contributions)

Deadline for Contributions

       Elective contributions are generally made from your paycheck, so you need to have your contributions set up within the year. You can choose to contribute everything at the beginning of the year if your plan allows it, or you can just contribute a certain amount or percentage from each paycheck.

Tax Deduction for Contributions

       Your contributions to a 401(k) plan reduce your taxable income, so you do not need to claim a tax deduction on your return. However, you may be eligible for the Retirement Savings Contribution Credit.

       If you’ve made any IRA contributions, you’ll want to keep a record of those in case you ever need to prove it to the IRS. The best record you can have for an IRA contribution is a Form 5498. The custodian of your IRA is required to file this form with the IRS and send you a copy as well. Form 5498 will show any contributions or conversions you’ve made as well as the required minimum distribution (RMD) if applicable. You should receive this form in May or June.

       By keeping a copy of your Forms 5498, you’ll have a record of your IRA contributions. This is especially handy if you ever take an early distribution from a Roth IRA, convert a traditional IRA to a Roth IRA, or make any nondeductible contributions. If the IRS ever questions the information you file when you do one of those actions, you’ll be able to back up your data with those Forms 5498.

       If you lose a Form 5498 or never receive it, simply contact the custodian of your IRA. They should be able to send you a copy for any year they maintained your IRA. While it’s nice to know that, don’t count on your custodian to always have the information you need. You’re best off keeping the records yourself (in an organized manner…) than relying on your custodian to have them for you.

       So that’s what you need to keep if you make any IRA contributions. It may sound trivial, but it can save you from future headaches. If you have any questions, let me know in the comments!

Contribution Limits

       The maximum amount you can contribute to a Roth IRA depends on your age and income. These are the correct Roth IRA contribution limits for 2009 and 2010. This limit can be split between a Traditional IRA or Roth IRA, but the combined total of your contributions to your Traditional and Roth IRAs cannot exceed this limit.

• Under age 49 at the end of the year: $5,000

 

• Age 50 or older by the end of the year: $6,000

Income Limits

       You are only eligible to contribute to a Roth IRA if your adjusted gross income (AGI) falls under certain limits. These limits depend on your tax filing status.

• Married Filing Jointly or Qualifying Widow(er): You can make a full contribution if your AGI is less than $166,000 (or $167,000 in 2010). If your AGI is more than $176,000 (or $177,000 in 2010), you cannot make a contribution to a Roth IRA. If your AGI is between $166,000 and $176,000 (or between $167,000 and $177,000 in 2010), then the amount you can contribute is reduced proportionately.

 

• Married Filing Separately but you lived with your spouse at any time during the year: If your AGI is more than $10,000 (same in 2010), you cannot make a contribution to a Roth IRA. If your AGI is between $0 and $10,000 (same in 2010), then the amount you can contribute is reduced proportionately.

 

• Single, Head of Household, or Married Filing Separately and you did not live with your spouse at any time during the year: You can make a full contribution if your AGI is less than $105,000 (same in 2010). If your AGI is more than $120,000 (same in 2010), you cannot make a contribution to a Roth IRA. If your AGI is between $105,000 and $120,000 (same in 2010), then the amount you can contribute is reduced proportionately.

Deadline for Contributions

       Contributions for a year can be made any time that year or until the due date of your tax return for that year. Contributions for 2009 must be made between January 1, 2009 and April 15, 2010. Contributions for 2010 must be made between January 1, 2010 and April 15, 2011. You can designate for which year (current or previous) you are making contributions if you contribute between January 1 and April 15.

Tax Deduction for Contributions

       There is no tax deduction for Roth IRA contributions. However, you may be eligible for the Retirement Savings Contribution Credit.

       If you’ve read my articles on tithing, you might begin to think that I hate tithing. (In fact, I almost titled this article “I Don’t Hate Tithing”.) Or maybe you think I’m just stingy. Although that conclusion would be difficult to reach after reading my thoughts about New Covenant giving. But the truth is there’s a deeper reason behind why I teach against tithing as a giving standard for Christians.

       Tithing is the Old Testament example and standard for giving. It was part of the Law of Moses given specifically to the Israelites through the Old Covenant. But Christians today are no longer under that covenant. We’re under the New Covenant. And you see an interesting trend when you look at what the early Christians were taught about giving.

       Keeping in mind that the New Covenant began after Jesus’ death on the cross, consider the teaching you find in the New Testament about giving. Can you find any passages where tithing is used as the example that Christians should follow for giving? I’ll wait while you look.

       I can already tell you that you won’t find any. I know because I’ve looked. I’ve searched long and hard to find all the verses in the Bible that talk about personal finance. And you know what I’ve found in the New Testament about giving? The only example ever used to explain how much Christians should give is Jesus. Not tithing, not the Old Testament offerings – only the life and sacrifice of Jesus Christ.

       That’s a significant statement. We’re supposed to give like Jesus did?! That sounds so difficult. How can I ever be that generous? How do I even calculate that for my budget??? But He is our example for giving as Christians who want to honor God. No, it’s not as easy to figure out as 10% of your income, but there are some general giving guidelines we can glean from the New Testament. New Covenant giving requires a deep, intimate relationship with God and demands that you spend time in His Word and in prayer seeking His will.

       Recently, I did a personal finance Bible study at my church for our winter Sunday school elective. When we started talking about tithing and giving, one person brought up the statistic that Christians only give about 2-3% on average. I also brought up the fact that only about 6% of Christians tithe to their churches (though about 27% of evangelical Christians give at least 10% of their income to charities). With statistics like that, why would I even try to teach something beyond giving 10%? We can’t even get to a tithing standard. How can I expect Christians to give generously and sacrificially???

       But I think that’s our first mistake. We think that by teaching tithing we’re giving Christians a simple, straightforward guideline that they can follow for their giving. It’s clearly taught in the Old Testament and even comes with curses and blessings. Surely that will motivate people to give generously. And that’s the problem.

       The reason I teach so strongly against tithing is because we have a much greater example and motivation for giving. Tithing never suffered for us. Tithing did not die for our sins. Tithing will not grant us eternal life. Tithing does not love us.

       But Jesus did suffer and die for our sins. Jesus will give us eternal life with God in Heaven. Jesus does love us – extravagantly, generously, sacrificially – even to the point of death!

       Brothers and sisters, why would we choose to continue using a lesser, weaker example for giving? We wonder why no one is motivated to tithe. Why don’t we teach giving based on Jesus’ life and sacrifice? How can our response to His gift be anything other than love, which will then produce generous, sacrificial giving in us? We can dismiss tithing and come up with excuses why we can’t afford it right now. But we cannot dismiss the gift of Jesus – the gift of His death for our sins so that we can have eternal life. The Holy Spirit will compel us to give if He is our focus.

       So if you wonder why I teach against tithing, that’s it. I don’t care if you disagree with my thoughts about why tithing no longer applies to Christians. I’m not here to debate the Law versus Faith (or Grace) ideas with you. But can’t we agree that teaching a giving standard based on Jesus’ gift to us will result in more generous, more sacrificial, and more cheerful Christian givers than teaching based on tithing? Let me know in the comments.

Contribution Limits

       The maximum amount you can contribute to a Traditional IRA depends on your age. These are the correct Traditional IRA contribution limits for 2009 and 2010. This limit can be split between a Traditional IRA or Roth IRA, but the combined total of your contributions to your Traditional and Roth IRAs cannot exceed this limit.

• Under age 49 at the end of the year: $5,000

 

• Age 50 or older by the end of the year: $6,000

Deadline for Contributions

       Contributions for a year can be made any time that year or until the due date of your tax return for that year. Contributions for 2009 must be made between January 1, 2009 and April 15, 2010. Contributions for 2010 must be made between January 1, 2010 and April 15, 2011. You can designate for which year (current or previous) you are making contributions if you contribute between January 1 and April 15.

Tax Deduction for Contributions

       How much of this contribution you can deduct on your tax return depends on your adjusted gross income and whether or not you are covered by an employer-sponsored retirement plan at work.

• For 2009 deduction limits if you are covered by a retirement plan at work, click here.

 

• For 2009 deduction limits if you are NOT covered by a retirement plan at work, click here.

 

• For 2010 deduction limits if you are covered by a retirement plan at work, click here.

 

• For 2010 deduction limits if you are NOT covered by a retirement plan at work, click here.

       You may also be eligible for the Retirement Savings Contribution Credit.

       A while back, Free Money Finance had a series of several excerpts from a book called Dollars & Doctrine by Rob Kuban. I thoroughly enjoyed the excerpts and was able to talk with the author some via the comments. You may have also noticed that I’ve highlighted some of Rob’s blog posts in my weekend reading roundups on Fridays. Rob’s book is packed with strong Biblical teaching on personal finance and his blog posts are often very insightful.

       I haven’t had the chance to read the entire book yet. I’ve only read the excerpts at Free Money Finance. So if you want a taste of what the book is like, check out these links:

• God’s Ownership
• Riches and Wisdom
• Taxes
• The Love of Money
• The Poverty Gospel
• The Prosperity Gospel
• The Tithe
• Treasure in Heaven
• Where to Give?

       I think what you’ll find as you read those excerpts is that Rob and I very much agree on the Bible’s message about personal finances. After reading those excerpts, I know Dollars & Doctrine would be well worth the money and the time spent reading it. You can also find a review of Dollars & Doctrine at Christian Personal Finance.

Limited Time Special Offer!

       Rob has a March Madness special going on now where he’s offering Dollars & Doctrine for half price. This offer is only available until April 10th. Rob also offered to send me a free copy of the book if three people buy the book and mention my name. So, if you’d like to get a copy of Dollars & Doctrine for half price and help me get a free copy as well here’s what to do:

1. When you’re checking out after purchasing the book, be sure to click the “Add special instructions to the seller link“.

 

2. Enter “providentplan.com” as your special instructions to the seller.

 

3. Be sure to use this link to get your copy of Dollars & Doctrine at half price.

       I’m confident you’ll be happy with the book. It’s clear to me from reading the excerpts on Free Money Finance that Rob has a heart for following God’s Word and glorifying Him through his finances. If you have read the book or end up buying a copy, let me know what you thought about it in the comments!


This article contains an affiliate offer (sort of – I get one free copy if three people buy the book and follow the instructions, but nothing else). Read my ad policy here.

       Here’s the link to the carnival I was in this week:

• Carnival of Personal Finance – What Is Earned Income? What Is Unearned Income?

       And here are some good articles from the past week:

• The Oblivious Investor – Single Premium Immediate Annuity: When and How Much to Buy [Mike makes some great points about single premium immediate annuities. If you've been considering annuitizing part of your portfolio, make sure you read this post.]

 

• The Oblivious Investor – Backtesting Investment Strategies [Another good article where Mike explains the reason why a low-cost, diversified portfolio of index funds is the way to go.]

 

• Get Rich Slowly – Do You Get What You Pay For? [April, a staff writer at Get Rich Slowly, brought up some insightful points about getting a good value in her post this week.]

 

• Money Help for Christians – 8 Reasons Why Christians Need to Talk about Money [Craig shares some clear reasons why Christians need to be discussing money and teaching what the Bible says about personal finance.]

 

• Bad Money Advice – Muni Basics [This is a must read if you invest in municipal bonds or are considering it.]

 

• Dollars & Doctrine – How Should a Christian View the Welfare System? [Rob discusses a Biblical view of the welfare system in the U.S. Very interesting article!]

 

• Out of Your Rut – Over 50 – No Pension, No 401K – What Now? [Kevin talks about Plan B - what to do when you've waited too long to start saving for retirement. There's hope, but it won't be easy!]

 

• Free Money Finance – Opening Moves: Making Initial Encounters Work [This stuff should be taught in every college. I guarantee graduates would have a higher rate of employment! It's a useful article for anyone who's interested in improving their manners in the business world. Definitely a good read!!!]

       Have a great weekend!