There is no magic number for how much you will need in retirement. If you ask an investment advisor how much you should save now for retirement, the answer is usually “as much as possible.” However, the IRS limits how much you can contribute to retirement plans. After remaining flat for the past few years, some contribution limits for 2012 reflect cost-of-living increases:
Retirement Account Contributions
2010
2011
2012
Maximum Contributions (under age 50)
401(k) or 403(b) plans
$16,500
$16,500
$17,000
SIMPLE plan
$11,500
$11,500
$11,500
IRA
$5,000
$5,000
$5,000
Roth IRA
$5,000
$5,000
$5,000
Defined contribution plans
$49,000
$49,000
$50,000
Catch-Up Contribution Limit (over age 50)
401(k) or 403(b) plans
$5,500
$5,500
$5,500
SIMPLE plan
$2,500
$2,500
$2,500
IRA
$1,000
$1,000
$1,000
Roth IRA
$1,000
$1,000
$1,000
Other Retirement Plan Limits
There are dollar limits placed upon some pension plans and retirement savings vehicles based on the following table:
Compensation Limits and Maximums
2009
2010
2011
Self-employed pension (SEP) maximum
$245,000
$245,000
$250,000
Highly compensated employee for SEP
$110,000
$110,000
$115,000
Defined benefit plan benefit limit
$195,000
$195,000
$200,000
Key employee for top-heavy 401(k) plans
$160,000
$160,000
$165,000
To ensure compliance with Treasury Circular 230, we are required to inform you that any advice concerning U.S. federal tax issues contained on this website is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code and was not written to support the promotion or marketing of any transaction or matter discussed herein. Application of tax regulations is specific to the individual or business and we recommend that you consult a qualified Komisar Brady tax professional for how the above information may apply to you.
