Recently, the IRS announced that retirement plan limits had been increased for 2012. For the preceding three years all limits had remained constant. If you are trying to maximize your retirement savings, these changes will be important to consider.
401k Contributions: The annual amount you can contribute to your 401k plan has increased to $17,000. per year. That calculates to $1,416.66 per month. Remember, 401k contributions are taken out of your pay check before taxes, so the deduction is less in actual out of pocket cost. Combine that savings with any match your employer might make and you may have the best possible vehicle for retirement savings.
Defined Contribution Annual Limit: This is the amount you are allowed to contribute to your plan from all sources. This would include: 401k contribution; employer match; catch up; profit sharing contribution, etc. When you add up all of these sources the amount can not exceed $50,000. That is an increase of $1,000. from current levels.
Catch Up Contributions: Catch up contributions, the amount individuals over age 50 can contribute to “catch up” (because they did not contribute enough when they were younger) has not been changed and remains at $5,500. per year.
See your Human Resources Department to update your retirement savings contribution instructions.
There are several other changes that have taken place: such as definition of highly compensated employees and key officer compensation. If you wish a complete list of the changes please contact us at Acclaro Wealth Management.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
