Tuesday, 3 July 2012

401k Contribution and catch-up Limit for 2012

In a 401k retirement plan, it’s vital to keep in mind that the contribution limit of 401k will change each year. The maximum limit is based on the living costs of an individual in the previous year. The contribution limits are basically announced during October 2011. The 2011 contribution limit is same as that of the last 2 years and maximum limit is $16,500/annual but in 2012 it has increased in 2012 because the American government recalculates the limitation regularly on account of the inflation.
The 401k plan is a great retirement saving account for the employees. The 401k plan enables the employees to collect certain money during their job by saving account to get proper amount as pension for the last age of life. Many employees today’s work on reaching their 401k limits because they’ve witnessed the fortune of some retired employees who do not have enough fund. Because growing age without or little fund can absolutely be tragic, employees must ensure that they maximize their 401k contribution limits to this retirement savings plan. New 401k limits in 2012 for certain items of the plan were announced by the IRS in 2011 October. Together with the living cost adjustments for all other 401k retirement plans accredited by US government, the limits for total 401(k) contributions for the whole 2012 were disclosed.
If you're enrolled in 401(k) plan, you're enabled to place-up to $50,000 in 2012. If, thus, your annual compensation is less than $50,000, then 100% of your annual compensation will be your total 401K contribution ceiling for this year. Total 401k Limits mean all your catch-up contributions, post-tax contributions, and pre-tax funding. Employer matches, if eligible to your 401k plan, are also counted with all these amounts. In 2012, the total ceiling for all plans was at $49,000 or 100% of your annual compensation. Depending on the living cost index determined by the American government, your total 401k Limits limit can be enlarged by $1,000 - as exhibited by the boost in 2012.
For your pre-tax amount, you can be enabled to put in up to $17,000 for this year if you are a traditional plan holder. It’s to be deducted from your amount of salary before withholding FIT. This special limit was set at $16,500 in the past two years. But it is indexed for inflation each year and can be raised by $500. If you are a simple plan holder, thus, you necessity to take consider that the maximum 401k contribution you're enabled to make from your salary’s amount before taxes remains at $11,500.
401k catch-up limits also stay the same as the last two years. For safe harbor and traditional plan holders, it is still at $5,500. For simple 401k plan holders, the ceiling's at $2,500. Catch-up amount is enabled by the government simply for those aged 50 or above, so they can take the saving amount for retirement.
These are only the enabled 401k contribution Limits that were increased for 2012. If you are a 401k retirement plan holder and you would like to maximize your chance to save the fund for your retirement, you ought to consult your boss. 

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