Several key ceilings on retirement plans will be higher next year. The maximum 401(k) contribution rises to $17,000 in 2012, up $500 over this year. Individuals born before 1963 can put in as much as $22,500. The contribution limits apply to 403(b) and 457 plans as well. The ceilings on SIMPLEs will remain $11,500. Folks age 50 or older in 2012 can put in an additional $2,500. Plan contributions can be based on up to $250,000 of salary next year. The paying limitation for defined contribution plans increased to $50,000 in 2012. That’s a $1,000 increase for Keogh plans, profit sharing plans and the like. Anyone making over $115,000 is highly paid for plan discrimination testing. And the benefit limit for pension plans is set to rise to $200,000 next year. There’s no change in the pay in limits for IRAs and Roth IRAs. The limits remain at $5,000, plus $1,000 more for anyone who was born in 1962 or earlier.
Retirement Articles
Dec 8
Benefit Plans
When you leave a job, the vested benefits in your retirement plans are an enticing source of money. It may be difficult to resist the urge to take the money as cash, particularly if retirement is many years away. But generally you will have to pay federal income taxes, state income taxes (if applicable) and a 10% penalty if you are under age 55. This can cut into your investment significantly. If your state income tax is 7.5%, for example, someone in the 25% federal tax bracket would loose 42.5% of the amount he or she took.
When you leave an employer, you are likely to have several options. You may
- Stay invested in your previous employer’s plan if your balance meets plan’s minimum
- Invest your assets in the new employer’s plan
Jun 23
A Big Idea
One way to insure that your retirement savings last as long as you do, is to consider an immediate annuity that will give you monthly payments for life.* This is a strategy for a portion of your retirement assets. Perhaps taking in a portion of your 401(K) and use an immediate annuity to provide your monthly income need for life. Invest the other portion of your 401(K) to provide growth and income to hedge inflation or provide for any lump sum needs (like a vacation or new car).
Nov 11
The 403b Advantage
The 403(b) was established in 1958 by the federal government to encourage employees in certain tax-exempt organizations to establish retirement savings plans. The name 403(b) refers to the relevant section in the Internal Revenue Code.
Social security payments become available to some taxpayers at age 62. Tempted to take those benefits right away? Before jumping in with both feet, discuss the timing with your financial professional.
It’s never too early to start saving. And, its never too late either. Even relatively small savings can grow significantIy over time.
For example, $100 a month in savings at 10% accumulates to almost $76,000 in 20 years. Over 40 years, that same $100 balloons to $632,000.
Roth IRAs have become a great estate planning tool. Previously, conversion from a regular IRA or 401(k) was simply prohibited for taxpayers with incomes in excess of $100,000. Under new legislation passed by Congress, everyone can convert a regular IRA to a Roth IRA.
In order to best prepare for the financial component of retirement, financial planner Ann Wolfson of Ann Wolfson Associates asks her clients to “actively imagine the possibilities of retirement.”
Wolfson asks clients to view their working years as years where time was sacrificed for work as opposed to retirement years where she asks clients to see time as theirs entirely. “In retirement, time is yours. Late meetings, missed events, and short vacations are things of the past. Imagine yourself with all the time you did not have control over during your working years. That’s what we’re talking about. What do we want to optimize your finances and investments for? Your time.”
Most people think of retirement as something to deal with later. But what happens when you won’t be going to work every day? Although you may be saving money now, your spending habits are likely based on your paycheck.