IRS Lowering 401K Maximum Contribution Limits in 2010?

One of the common pillars of retirement advice is to "save more." Some people who have watched their 401Ks slide into the realm of 201K are seriously considering investing more in an effort to catch up. If you're in this group, you might be in for a rude awakening in 2010.

The IRS determines 401K maximum contribution limits based on a formula using 3rd quarter consumer price index for all urban consumers (CPI-U). In the recent past, the CPI-U has pushed higher each and every time the IRS did their calculations. However, in Oct 2009 the 3rd quarter CPI-U value may very well be lower than in 2008. Since March 2009, the CPI-U has come in lower than its corresponding 2008 value. What does this mean for 401K maximum contributions? Well, it means they could go lower. Initial thoughts are that 401K maximum contributions could be about $500 lower in 2010.

Here's an Associated Press article that talks about it more.