Changes In IRA & 401(k)s for 2012

Wednesday 11/23/2011 - 12:33:18 pm
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A recap of contribution limit and phase-out adjustments.

Presented by Jacob Warren

The IRS has announced cost-of-living adjustments to IRAs and employer-sponsored retirement plans for 2012, so here is what you need to know about the newly altered contribution limits and phase-outs for these plans.

401(k) & IRA yearly contribution limits. In 2012, these are the annual contribution limits for some popular retirement savings vehicles:

• 401(k)s, 403(b)s, most 457 plans, Thrift Savings Plan (TSP) - $17,000 with an additional $5,500 catch-up contribution allowed for those 50 or older. (2012 COLA: $500.)
• Traditional & Roth IRAs - $5,000 with an additional $1,000 catch-up contribution allowed for those 50 or older. (No 2012 COLA.)
• Simple IRAs - $11,500 with an additional $2,500 catch-up contribution allowed for those 50 or older. (No 2012 COLA.)
• SEP IRAs - $50,000 or 25% of an employee’s compensation, whichever is lesser. (2012 COLA: $1,000.)
• 415(b) defined benefit plans – the limitation on annual benefits under a defined benefit plan is increased to $200,000. (2012 COLA: $5,000.)1,2,3,4

Traditional IRA phase-outs. The new MAGI limits affecting deductions for traditional IRA contributions are:

• Singles & heads of household covered by a workplace retirement plan: $58,000-68,000. (2012 COLA: $2,000.)
• Married filing jointly, with spouse making the IRA contribution covered by a workplace retirement plan: $92,000-112,000. (2012 COLA: $2,000.)
• Married filing jointly, IRA contributor not covered by a workplace retirement plan but married to someone who is: $173,000-183,000. That MAGI range is for a couple rather than an individual. (2012 COLA: $4,000.)1

Roth IRA phase-outs. The MAGI limits affecting deductions for Roth IRA contributions are set as follows for 2012:
• Singles & heads of household covered by a workplace retirement plan: $110,000-125,000. (2012 COLA: $3,000.)
• Married filing jointly: $173,000-183,000. (2012 COLA: $4,000.)
• Married filing separately, with the Roth IRA contributor covered by a workplace retirement plan: $0-10,000. (No 2012 COLA.)1

Lastly, a couple of notes for employers. When it comes to defining "key employees" in a top-heavy plan, the determination limit goes up $5,000 to $165,000 in 2012. The maximum taxable earnings amount for Social Security increases to $110,100 from $106,800 next year.5

Jacob Warren
Warren Wealth Management
2300 Main Street, Suite 947
Kansas City, MO 64108
(816) 286-1810




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These are the views of Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.


Citations.
1 www.irs.gov/newsroom/article/0,,id=248482,00.html [10/20/11]
2 money.usnews.com/money/blogs/planning-to-retire/2011/10/21/401k-and-ira-changes-coming-in-2012 [10/21/11]
3 www.irs.gov/retirement/participant/article/0,,id=211345,00.html [10/20/11]
4 www.irs.gov/retirement/article/0,,id=111419,00.html#12 [10/21/11]
5 www.lexology.com/library/detail.aspx?g=cbc951c9-7f27-4a92-93e3-4c0193f51347 [10/20/11]



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