2012 Contribution Limits: Employer Retirement Accounts

How much should I put in my retirement account each year?
The answer of course, depends. For example, some clients tell me they love working and they want to work until they are 70, some tell me they plan to work until 65, others tell me they want to retire yesterday. The earlier you retire, the more you need to save. Some people spend $60,000 per year, some spend $160,000 and some $260,000; and they want to maintain a similar lifestyle in retirement. Obviously, the more you want to spend in retirement the more you need to save now. There are other variables to consider as well, such as pensions, social security, current investment holdings, assumed rates of return, any plans for bequests, and large purchases in retirement, etc. So how much you need to put in your retirement account will be different for each family.

So where do you start?
A good place to start is with your company’s retirement plan and knowing the maximum amount that you can put into the plan. There are different types of retirement plans, dependent upon the type of company for which you work. And consider, if your company says the maximum percentage is for example, 10%, and you make $60,000 then your maximum is $6,000 even if the IRS says the maximum dollar amount is higher.

401(k), 403(b), 457, and SARSEPs
The 2012 maximum contribution limit is $17,000. If you are 50 or turning 50 in 2012 you have the opportunity to add additional money to your retirement plan each year in the form of the Catch-up contribution, that amount for 2012 is $5,500.

SIMPLE plan
The 2012 maximum contribution limit is $11,500. If you are 50 or turning 50 in 2012 you have the opportunity to add additional money to your retirement plan each year in the form of the Catch-up contribution, that amount for 2012 is $2,500.

It’s on your To-Do. Let’s get it To-Done!
1) Already have your plan set to max? Better double check it! 2012 is the first year since 2009 that the maximum contribution has been raised for 401(k), 403(b), 457, and SARSEPs because it is tied to inflation. Catch-up contributions remain unchanged. SIMPLE plan contributions and SIMPLE plan Catch-ups remain unchanged as well.
2) Not yet taking advantage of your employer’s match? Want some inspiration; pick up a calculator and figure out how much free money you are not taking from your employer each year! Then, each time you get a raise, increase your 401(k) contribution by 1%, you will not even feel it, because it is money you never had in your hands. Or have you been putting it off because you have been busy or unsure how to start? Give your HR department a call today.

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