NOTE: This post is part of an ongoing education series. This information is for educational purposes only. This information does not constitute investment advice. No rational person would make investment decisions based on a blog post. Please consult with your financial advisor before taking any action.
You’ll be able to contribute up to $17,000 to a 401(k), 403(b), most 457 plans or the federal government’s Thrift Savings Plan in 2012.
The limit for the last few years has been $16,500. So if you are fortunate enough to make quite a bit of money in 2012 you can set aside $17,000 in your 401(k).
Workers age 50 and older can continue to make catch-up contributions of up to an extra $5,500 for the year, the same amount as in 2011.
So, if you are over 50 you can contribute $22,000 in 2011 and $22,500 in 2012.
The maximum IRA contribution limit for 2012 remains unchanged at $5,000 ($6,000 if you are age 50 or older by the end of the year). But the income eligibility limits to deduct IRA contributions have increased. Single filers and heads of household who participate in a retirement plan at work can deduct the maximum IRA contribution if their modified adjusted gross income is $58,000 or less and a partial contribution is their income is up to $68,000 (up from $56,000 and $66,000 in 2011). Individuals who do not participate in a workplace retirement savings plan can deduct their full IRA contribution regardless of income.
“…do not participate…” read as does not have a workplace plan available. If you choose not to participate but it is available then the income limits do kick in.
My simple rule of thumb is that if you save 10% of your gross income per year for 30 years and make 10% return per year, you will have more income per year after retirement than when you were working.