2012 CHANGES IN RETIREMENT PLAN CONTRIBUTION LIMITS

Every year, the Internal Revenue Service announces changes in the amounts individuals can deposit to qualified retirement plans. Here are some of the notable changes for 2012:

· The maximum employee contribution for 401(k), 403(b), most 457 plans or the federal government’s Thrift Savings Plan is $17,000 (the limit was $16,500 in 2011).
· Workers who will reach age 50 anytime in 2012 can make “catch-up” contributions of up to an extra $5,500 for the year (the same amount as in 2011).
· The maximum IRA contribution limit for 2012 remains unchanged at $5,000. An additional $1,000 can be added as “catch-up” if you are age 50 or older by the end of the year.
· Not all IRA contributions are deductible. If you (or a spouse) have a workplace retirement plan, the deduct ability of contributions is dependent on your adjusted gross income. (Individuals who do not
participate in a workplace retirement savings plan can deduct their full IRA contribution regardless of income.) For 2012, these thresholds have increased.
· While Roth IRAs don’t offer tax deductible contributions, the amount that can be deposited is also conditional upon AGI. Single filers and heads of household can make the maximum Roth IRA
contribution of $5,000 if their adjusted gross income is less than $110,000 in 2012.

Those five bullet points are just the tip of the iceberg when it comes to assessing the criteria for participation in qualified retirement plans.  While tax deduct-ability can provide some extra saving incentive, it is prudent to consider these deductions (and restrictions) within the context of your larger financial picture.

WHEN IS THE LAST TIME YOU ASSESSED YOUR RETIREMENT PLAN SAVINGS? START 2012 WITH A CLEAR IDEA OF YOUR “BIG PICTURE” BEFORE YOU ADD (OR SUBTRACT) FROM YOUR RETIREMENT CONTRIBUTIONS.

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