The contribution limits for Roth and Traditional IRAs for 2008 are:
$5,000

The Catch up provision brings the limit up to $6000 for people aged 50+.

Note that those with high incomes may have reduced limits for Roth contributions. Married couples with adjusted gross incomes above $160,000 can’t contribute to a Roth, for instance.

401K Contributions Limits for 2008 are:

$15,500

The Catch up provision brings the limit up to $20,500 for people aged 50+.

Investing in your retirement is a smart thing to do. As defined benefit plans give way to defined contribution plans, the onus of retirement is more and more in our own hands. Gone on the days when being a faithful company man meant that you’d be taken care of in retirement.

Something to remember though, is that there’s more to investing than just retirement. Having a healthy mid-term investment portfolio is also important. If you’re young, it may be even more important than retirement savings. Just like disability insurance is more important than life insurance when you’re young, so too is non-retirement investing.

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Many companies are transitioning their retirement programs from defined benefit plans, such as pension plans, to defined contribution plans, such as 401Ks. This puts the employee in a much more active situation. Instead of paying a fixed amount and having a predetermined, and guaranteed benefit, you decide how much to put in to your plan. You must also manage your account to ensure that it performs well. You have no guarantees and the lifestyle you’ll be able to afford in retirement is entirely up to you.

Most companies that offer 401K plans to their employees also offer some kind of company matching. They may give you a dollar for dollar match, a 50 cents on the dollar match, or similar up to a certain percentage.

Whatever amount you contribute to you 401K, you should contribute at least enough to get the full company match. This match is basically free money that can add significantly to your portfolio gains. Imagine you put $1000 into your 401K and your company matched 50%. The match could make up for otherwise poor performance. Even if your portfolio didn’t appreciate over the course of a year, on your investment of $1000, your account would be worth $1500 thanks to the match, which amounts to a sizable 50% gain.

If the portfolio did appreciate, the gain would be even larger. The extra funds from your company match will continue to grow as the interest compounds between now and when you make withdrawals at retirement. There may be no such thing as a free lunch, but company matching is about as close as you can get.