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Retirement Planning Key Numbers

August 2, 2012

An increasing number of retirement plan and IRA limits are indexed for inflation each year, and many of the limits eligible for a cost-of-living adjustment (COLA) adjusted upward for 2012. Some of the key numbers for 2012 are listed below, with the corresponding limit for 2011. (The source for these 2012 numbers is IRS Information Release IR-2011-103.)

Elective deferral limits 2011 2012
401(k) plans, 403(b) plans, 457(b) plans, and SAR-SEPs1 (includes Roth contributions) Lesser of $16,500 or 100% of participant’s compensation ($22,000 if age 50 or older)2 Lesser of $17,000 or 100% of participant’s compensation ($22,500 if age 50 or older)2
SIMPLE 401(k) plans and SIMPLE IRA plans1 Lesser of $11,500 or 100% of participant’s compensation ($14,000 if age 50 or older) Lesser of $11,500 or 100% of participant’s compensation ($14,000 if age 50 or older)
IRA contribution limits 2011 2012
Traditional and Roth IRAs Lesser of $5,000 or 100% of earned income ($6,000 if age 50 or older) Lesser of $5,000 or 100% of earned income ($6,000 if age 50 or older)
Defined benefit plan annual benefit limits 2011 2012
Annual benefit limit per participant Lesser of $195,000 or 100% of average compensation for highest three consecutive years Lesser of $200,000 or 100% of average compensation for highest three consecutive years
Defined contribution plan limits (qualified plans, 403(b) plans, and SEP plans) 2011 2012
Annual addition limit per participant (employer contributions; employee pretax, after-tax, and Roth contributions; and forfeitures) Lesser of $49,000 or 100% (25% for SEP) of participant’s compensation Lesser of $50,000 or 100% (25% for SEP) of participant’s compensation

1 Must aggregate employee deferrals to all 401(k), 403(b), SAR-SEP, and SIMPLE plans of all employers; 457(b) contributions are not aggregated. For SAR-SEPs, the percentage limit is 25% of compensation reduced by elective deferrals (effectively a 20% maximum contribution).

2 Special catch-up limits may also apply to 403(b) and 457(b) plan participants.

 Retirement plan compensation limits 2011 2012
Maximum compensation per participant that can be used to calculate tax-deductible employer contribution (qualified plans/SEPs) $245,000 $250,000
Compensation threshold used to determine a highly compensated employee $110,000 (when 2011 is the look-back year) $115,000 (when 2012 is the look-back year)
Compensation threshold used to determine a key employee in a top-heavy plan $1 for more-than-5% owners

$160,000 for officers

$150,000 for more-than-1% owners

$1 for more-than-5% owners

$165,000 for officers

$150,000 for more-than-1% owners

Compensation threshold used to determine a qualifying employee under a SIMPLE plan $5,000 $5,000
Compensation threshold used to determine a qualifying employee under a SEP plan $550 $550
  Income phaseout range for determining deductibility of traditional IRA contributions for taxpayers: 2011 2012
1. Covered by an employer-sponsored plan and filing as:    
  Single/Head of household $56,000 – $66,000 $58,000 – $68,000
  Married filing jointly $90,000 – $110,000 $92,000 – $112,000
  Married filing separately $0 – $10,000 $0 – $10,000
2. Not covered by an employer-sponsored retirement plan, but filing joint return with a spouse who is covered by a plan $169,000 – $179,000 $173,000 – $183,000
 Income phaseout range for determining ability to fund a Roth IRA for taxpayers filing as: 2011 2012
  Single/Head of household $107,000 – $122,000 $110,000 – $125,000
  Married filing jointly $169,000 – $179,000 $173,000 – $183,000
  Married filing separately $0 – $10,000 $0 – $10,000

 

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives 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 or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

 

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