Posted by: Professionals In Human Resources Association (PIHRA) | December 6, 2011

Higher 401(k) Contribution Limits in 2012

2012 is just around the corner and increasing your 401(k) contributions should be a part of your New Year’s resolution.

The IRS raised the annual contribution limits for IRAs, 401(k)s and other retirement plans for 2012 which is based on inflation and to adjust for the increase in the cost of living during retirement years.

Deferral Limits

2012

2011

Elective Deferral Limit for 401(k), 403(b), and 457(b) Plans

$17,000

$16,500

Catch-Up Contribution Limit

$5,500 (no change)

$5,500

Annual Additions Limit for Defined Contribution Plans

$50,000

$49,000

Limit on Annual Benefits for Defined Benefit Plans

$200,000

$195,000

Surveys of retirement plan participants show that only 5% of about 60 million 401(k) plan participants contribute the maximum allowed to their 401(k) plan account.

Saving in a 401(k) is more affordable than you think. While contributing $17,000 a year may sound like a lot of money, it’s actually only about $210 per week after the tax savings are factored in. When you make pre-tax contributions of $17,000 to your 401(k) plan, you can save about $6,000 in federal and state income taxes each year.

If maxing out your 401(k) contribution limit is too high then at the very least make sure to contribute enough to take advantage of any company match. It is essentially free money left on the table if you don’t.

Harry Kim, MBA
LPL Financial
Wealth Manager

3111 W Burbank Blvd Suite #103
Burbank, CA 91505
Office: 818-569-3600
Fax: 818-569-3700
Direct: 213-268-1641
website: http://www.lpl.com

Securities are offered through LPL Financial, Member FINRA/SIPC

This information was developed as a general guide to educate plan sponsors, but is not intended to be all encompassing. Each plan has unique requirements, and plan sponsors should consult their attorney or advisor for specific advice. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.

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