Photo: Dan Macy
Starting 2012, savers can sock away $17,000 per year in a 401(k) retirement plan without paying upfront taxes, up from $16,500 in 2010. This increase applies to all 401(k) and 403(b) plans, most 457 plans and the federal government’s Thrift Savings Plan. The last time the IRS raised this elective deferral (contribution) limit was in 2009.
The IRS raised retirement plan limitations on Oct. 20, effectively increasing the amount that retirement plan participants can contribute to their plans before taxes kick in.
The Internal Revenue Code mandates that this and other contribution limits be appraised each year to determine if cost-of-living adjustments (COLAs) need to be made. This year, several key limits have changed due to the increased cost-of-living index. According to IRS’ chart of COLA adjustments, other raised contribution limits of note include:
- The amount the deduction increased for traditional IRA contributors depends on employees’ filing status and the status of their workplace retirement plan. Specifically the deduction increased from $56,000 to $58,000 for single filers (a $2,000 increase); from $66,000 to $68,000 for heads of household; and a “phase-out” of the deduction starts at $173,000 (up from $169,000) for couples filing jointly. The deduction will be completely phased out for couples filing jointly at $183,000 now. (That range was bumped up $4,000.)
- The adjusted gross income (AGI) phase-out range for Roth IRA contributors now spans $173,000 to $183,000 for married couples filing jointly (up $4,000), and it now is $110,000 to $125,000 for singles and heads of household (up $3,000).
- And the AGI limit for the saver’s credit increased $500, $750 and $1,000 for single filers (now $28,750), heads of households (now $43,125) and married couples (now $57,500), respectively.
The limit for catch-up contributions for participants 50 and older did not increase, remaining at $5,500. See the IRS press release.