A decline in consumer prices this quarter – i.e., deflation – could result in 401(k) contribution limits being lowered next year for the first time since Congress imposed the limits in 1986.

Contribution limits for 401(k) plans are adjusted annually, based on a complicated formula tied to the Consumer Price Index for the preceding third quarter. Thus, this quarter's CPI will be used to calculate the 2010 contribution limits.

But the CPI was flat in July and, depending on how it performs in August and September, there's a chance the formula could produce lower contribution limits for 2010.

It would then be up to the Internal Revenue Service to decide whether to keep contribution limits at 2009 levels or to lower them. A decision is due Oct. 15.

In 2009, most workers can contribute a maximum $16,500 to a 401(k); those who are 50 and older may put away an additional $5,500 in so-called catch-up contributions. Contributions are deducted from your paycheck before taxes are assessed, lowering your taxable income.

If the IRS does lower the contribution limit, it would fall by $500 to $16,000, assuming inflation remains at recent levels.

The limit on catch-up contributions would fall to $5,000.

Courtesy of DallasNews.com

Deflation???...I went grocery shopping yesterday-my food bill was sky high!...Wise Owl

A prominent banking analyst said on Sunday that 150 to 200 more U.S. banks will fail in the current banking crisis, and the industry's payments to keep the Federal Deposit Insurance Corp afloat could eat up 25 percent of pretax income in 2010.

Richard Bove of Rochdale Securities said this will likely force the FDIC, which insures deposits, to turn increasingly to non-U.S. banks and private equity funds to shore up the banking system.

Bove said "perhaps another 150 to 200 banks will fail," on top of 81 so far in 2009, adding stress to the FDIC's deposit insurance fund.

Here’s what consumers need to know.

What does FDIC insurance cover?

Concerned consumers should confirm that accounts at their bank are FDIC-insured. That way, even if the bank fails, you won’t lose your money.

Use the online estimator tool at MyFDICinsurance.gov or call 1-877-ASK-FDIC.

In 2008, the FDIC increased the amount of money it insures per individual per bank from $100,000 to $250,000 until Dec. 31, 2013. That means that account holders can have up to $250,000 insured in a checking or savings account, certificate of deposit or money-market account, collectively in one bank. In addition, you can have a joint account with a spouse for up to $250,000.

If you have more than $250,000 in deposits, consider signing up for a Certificate of Deposit Account Registry Service (CDARS), a program in which you can deposit more than the insured limit with one participating bank, says JimChessen, the chief economist at the American Bankers Association. Your bank will swap the amount in excess of $250,000 to another bank so that you maintain full FDIC protection on your investment. The money is at multiple banks, but you sign one agreement with the participating bank of your choice, earn one interest rate on all your accounts, and receive a regular statement. To locate a bank that offers this program in your region, click here.

Courtesy of Smart Money.com

According to recent figures from Fidelity, 23% of plan participants between the ages of 30 and 49 have at least one retirement plan loan outstanding. Now, I'm sure that some of those loans reflect genuine economic hardship -- the economy has been through the ringer recently, after all -- but I'm certain that plenty of them also reflect someone's "need" for a fancier car, or a new kitchen, or a swimming pool, or whatever.

Courtesy of MotleyFool.com

Federal taxes will be about the same no matter where you live, but state and local tax burdens can vary greatly, especially if you’re retired. Click on any state below to get a full lowdown on tax treatment for retirees. Or select a tax category that interests you, to see which states have the highest and lowest rates. For more, read Tax-Friendly Places to Retire

Thanks Kiplingers.com

As my wife and I — and millions of other first-wave baby boomers — begin thinking seriously about income in our post-working years (and may those working years continue for years and years to come), an idea that has been floating around in my mind for a while finally has crystallized.

Simply, I've come to believe that successful retirement is a matter of saving enough and not spending too much, rather than being a function of successful investing.

Now here comes the heretical part, especially after years of writing about investments and earning a living based, indirectly, on the sales of investment products: the investment part really isn't all that important.

Recent research from Thornburg Investment Management Inc. of Santa Fe, N.M., found that among major asset classes, only common stocks and municipal bonds earned a net positive return after expenses, taxes and inflation over 30 years. But over other time periods, such as five and 10 years, for instance, only government bonds produced real returns.

Does that mean that we should give up on investing? No. But after years of hearing about asset allocation and risk tolerance, non-correlated assets, alternative investments and buy-and-hold versus trading — all interesting and important to some degree — I think that for most people, most of the time, all that stuff is academic and perhaps largely irrelevant.

Evan Cooper opinion InvestmentNews.com

CALPERS' actuary is finally conceding what its board members and top executives can't bring themselves to say: The pension status quo has to die.

Ron Seeling said at a Sacramento forum that CalPERS and its member agencies were facing decades of “unsustainable pension costs of between 25 percent of pay for a miscellaneous plan (covering general employees) and 40 to 50 percent of pay for (police and firefighters) ... . We've got to find some other solutions.”

Seeling is the pension system's chief actuary, the man responsible for calculating pension costs for 1.6 million state and and local government employees. He has long defended the analysis that went into granting more generous pensions earlier this decade. So this is a huge admission.

Courtesy of SacBee.com

Here's a recap of money market yields (7-day yields) from several mutual fund companies:

Vanguard Prime (VMMXX) .47%

Fidelity Cash Reserves (FDRXX) .37%

T. Rowe Prime Reserves (PRRXX) .00%

Schwab Investor MM (SW2XX) .01%

Regulators on Friday shut down two banks in Florida, bringing to 71 the number of federally insured banks to fail this year under the weight of the weak economy and rising loan losses.

The Federal Deposit Insurance Corp. was appointed receiver of the banks: First State Bank of Sarasota, Fla., and Venice, Fla.-based Community National Bank of Sarasota County.

Marcia Tillotson and Joy Kenefick aren’t your typical drill sergeants.

The boot camp — an extended version of its military namesake — is generally aimed at people a year or two from retirement. While the exercises may be especially rigorous, they offer broad lessons for those who think they may be ready to stop working.

The two advisers require pre-retirees to complete a checklist of exercises, including taking a hard look at where their money is going and making sure they’re on track, for instance, to pay off the mortgage. (That’s a nonnegotiable must-do before retirement, the two women say.

Here's the first of the the women’s eight drills, which you can use to help assess your retirement readiness.

• SPENDING The most important exercise is arguably the first: a thorough cash-flow analysis. That includes taking stock of every expense for the past year, including insurance and vacations. “The purpose of it is to determine what your lifestyle costs,” Ms. Tillotson said.

Courtesy of NYTimes.com

Market Summary

How do you know if you're on track for a financially secure retirement? There are a zillion ways to find an answer to that question, but in a time of financial and economic uncertainty perhaps the simpler the method the better. Brett Hammond, TIAA-CREF's chief investment strategist, has designed an easy way for employees to check on retirement readiness based on their asset-to-salary ratios at different points in their career. "The big problem is that there is no magic number for the amount of money you need," Hammond says. "This is an attempt to address the needs of real people. If you tell me your assets, income, and age, I can tell if you're on track for retirement."

How will you know if your nest egg will cover 60% of pre-retirement income once you stop working?

If you're 35 and plan to retire at 65, you need 2.1 times your salary to be on track. By 45, you had better have 3.6 times. At 55, the multiple rises to 5.4 times. And by the time you retire, you'll want it to be 7.7 times.

BusinessWeek.com provides the TIAA-CREF retirement formula.