Retirement Plan Limits for 2012
The IRS has just announced that they will be increasing the limit on retirement plan contributions for 2012:
- For employees participating in 401(k), 403(b) and 457 plans, the contribution limit has increased from $16,500 to $17,000. The catch-up amount for participants over age 50 will remain at $5,500.
- For individuals with a SEP plan, the annual contribution limit has increased from $49,000 to $50,000. This is based on an increase in the annual compensation limit from $245,000 to $250,000.
- For individuals with a SIMPLE retirement plan, the contribution limit will remain the same as 2011 at $11,500.
- The traditional IRA contribution limits will not increase for 2012. The limit for individuals under age 50 is $5,000 and the limit for individuals 50 or older is $6,000. However, the phase-out range for deductible contributions has increased for 2012. Please note that individuals (or their spouses) must have earned income (wages, self-employment) to contribute to an IRA.
o Deductible IRA contributions are subject to phase-out depending on income, filing status, and participation in employer retirement plans.
§ For single individuals covered by a retirement plan at work, a deductible IRA contribution is phased out between $58,000 and $68,000.
§ For married (filing jointly) individuals covered by a retirement plan at work, a deductible IRA contribution is phased out between $92,000 and $112,000.
§ For married (filing jointly) individuals whose spouse is covered by a retirement plan, a deductible IRA contribution is phased out between $173,000 and $183,000
§ For married (fining separately) individuals, a deductible IRA contribution is phased out between $0 and $10,000
o Non-deductible traditional IRA contributions are always allowed. The contributions will not be taxable when distributed but the earnings on those amounts will still be taxable.
- The Roth IRA contribution limits will not increase for 2012 but the phase-out range for Roth IRA contributions has also increased. The limit for individuals under age 50 is $5,000 and the limit for individuals 50 or older is $6,000. Please note that a Roth contribution is not allowed if income exceeds certain limitations. Individuals (or their spouses) must have earned income (wages, self-employment) to contribute to a Roth IRA.
o Single individuals can contribute to a Roth IRA if their income does not exceed $125,000. A partial contribution is allowed if income is between $110,000 and $125,000.
o Married (filing jointly) individuals can contributed to a Roth IRA if their joint income does not exceed $183,000. A partial contribution is allowed if joint income is between $173,000 and $183,000.
o Married (filing separately) individuals can make a partial contribution if their income does not exceed $10,000.
Please contact us if you have any questions about retirement plan contributions. We can work with you and your investment advisor on retirement contribution planning for your specific tax situation.