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Make a New Years Resolution to max out your retirement savings this year! Every year, there are always slight changes in what you can contribute, so here are the 2012 guidelines, as published by the IRS.
Employer Sponsored Plans
In 2012, the IRS has released some slightly higher contribution limits for employer sponsored plans. For 401(k), 403(b), most 457 plans, and the government’s Thrift Savings Plan, the maximum contribution has increased to $17,000. That is $500 higher than 2011. Once again, if you are over 50, you can make catch-up contributions of up to $5,500 for the year, which is the same as 2011.
If you’ve been contributing the max each year, make sure that you raise it a little to get the full max this year. If you are paid bi-weekly, that is only an extra $19.23 per paycheck. Hardly noticeable!
Individual Retirement Accounts
For 2012, the maximum IRA contribution remains the same at $5,000 if you are under 50, and $6,000 if you are over 50. However, eligibility income limits has increased this year for both Traditional IRAs and Roth IRAs.
For Traditional IRAs, you can deduct your contributions if you participate in a workplace retirement plan if you make up to $58,000, or partially deduct your contribution if you make up to $68,000. This is an increase of $2,000 at each limit.
For Roth IRAs, you can make the maximum contribution if you make less than $110,000 in 2012, or a partial contribution if your income is less than $125,000. If you’re married, the maximum adjusted gross income is $173,000 if you’re filing jointly.
The Savers Tax Credit
Another benefit that returns this year is the Savers Tax Credit. If you make less than $28,750 for singles and $57,500 for married filed jointly, you can receive a tax credit up to a maximum of $1,000 (or $2,000 for couples). It ranges from 10% to 50% of your contribution up to the maximum, and disappears entirely above the thresholds listed.
Readers, do you plan on increasing your retirement contributions this year?
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This post was written by...
Robert – who has written 317 posts on The College Investor.
Robert is the founder and editor of The College Investor, a personal finance site dedicated to young adult and college student finances. You can learn more about him here and connect with him on Twitter or Facebook.
{ 10 comments… read them below or add one }
I usually max out my Roth IRA but haven’t for 2011 yet because I’ve been focused on getting the mortgage paid off — which means I’ve skipped a few months of contributions. I may at least go back to contributing something each month there. I do still contribute heavily to my 401k and Roth 401k thought.
We max out our RRSP contributions every year and we max out what we can do with our employer. We are really fortunate to have these options available so we make try to make the most of it.
RRSP’s sound like great plans!
i try to max out my RRSP contributions also , but i dont fellow it enaugh tough , will try to for this new year and increase my contributions
I max out my retirement savings (403B, IRA & Roth IRA). I make it automatic by setting up a payroll deduction.
That is the way to do it – are you reading my mind because I already have a post scheduled about automatic investing.
Good advice Robert. May not be possible for all to max out 401Ks, but one should certainly strive to max out their IRAs and at least their company match on their 401Ks.
Excellent point. I think this is the best you can do towards your financial independence. I am maxing out 401(k) and IRA both for last 2 years and will continue to do so.
I max out my Roth every yr. If I were to win $300 I’d prob put it towards that.
Good read, once again!
-Ashley Morrissey
ashleymorrissey90(at)yahoo(dot)com