401k Limits 2011 Up In 2012

For 2012, there are certain 401k limits 2011 that were raised. The total maximum limit for the year and the standard pre-tax deferral limit for 401k plans will be higher next year, according to the recent announcement of the IRS about the deferral limits for pension and retirement plans. All contribution limits for pension and retirement plans are indexed for inflation.

The total maximum amount you could contribute to your 401k for each year from 2009 to 2011 was USD 49,000. For 2012, it is USD 50,000. The total annual contribution limit, after three years of being stagnant, is finally raised by USD 1,000, which is the set amount of increase every year.

For next year’s contributions, among the 401k limits for 2011 that were raised for next year’s contributions is the elective deferral for traditional and safe harbor plans. While it was at USD 16,500 from 2009 to 2011, it’s now increased to USD 17,000 for 2012.  For those on a SIMPLE 401k plan, though, the maximum is still at USD 11,500. The amount you and your employer have agreed to set aside from your gross salary for your 401k plan is what’s called an elective deferral.

Even in 2012, catch-up contributions won’t have any change in its limits. Entitled to a catch-up contribution of USD 5,500 are qualified traditional and safe harbor participants. Meanwhile, SIMPLE 401k participants are can make a catch-up contribution of USD 2,500. These are the additional pre-tax deferrals participants who are at least 50 years old can give to their 401k plan. The government gives this provision to help the said participants to “catch up” on their retirement savings.

Talk to your 401k administrator about the maximum savings you can make and your benefits if you’re participating in this plan and would like to take advantage of these contribution limits.

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