It’s never too late to think about your future
If you aren’t indifferent to your future, you should think about your life after retirement. Even if you are rather young, now it’s right the time to think about your life in future. The earlier you start to care about your future, the more beneficial it will be to live after retirements.
Today employers and government offer a lot of different retirement plans. You are able to get pensions, IRAs (Individual Retirement Accounts), 403b and 401k plans. All these plans have their own pros and cons. Now we are going to pay attention to 401k plan as it gives a lot of advantages to employee.
401k contribution limits 2012
Comparing 401k plans to other retirement savings plans, it looks beneficial as it do not imply any compensation limits. You can have any compensation according to 401k plans. But there is one requirement. Your employer should offer this type of plans for you. In order to make proper salary deduction, your company has to support these types of plans.
401k plans imply several contribution limits you should know about. The first one concerns the group of limits for the employee. The second group of limits is for the employer. The third one is applied to pre-tax contributions and total contributions.
It’s very important to save your earnings and decrease tax bill. With the help of 401k contribution limits you can do it. Everybody wants to contribute as much before tax money as it’s possible. But as we all know three years were without increases of contribution limits. What is going to be in 2012? Are they going to increase the limit?
I’ve done some research to answer on this complicated question. Take a look at the analysis which I have made according to historical changing of contribution limits. This is my estimation of contribution limits variation for 2012.
The changing contribution limit research
2012 401k maximum contribution limits
As it’s shown on the graph, 401k contribution limits have stayed flat for past several years. This happens because of a lack of cost of living adjustments. As the rate of inflation has been lower than the rate which causes an increase. The IRS (Internal Revenue Service) calculates all the increases according to annual changes in the consumer price index for urban workers. In 2009, 2010, 2011 these increases do not affect an increase in the maximum contribution.
Is it getting clearer? So, what do you think the 2012 401k contribution limits are going to be?
I’ve analyzed some info from CPI (Consumer Price Index) tables for the past several years. I expect that the 2012 401k contribution limit will be $17,000 for employees under 50. This conclusion is based on data through June 2011. I assume that the catch up contributions will be the same at $5,000. Suchwise, doing a simple calculation, if your age is 50 or older at the end 0f 2012, your tax deductible limit on 401k’s is going to be $22,500.
It’s worth noting that I give you only my predictions. So if you need exact information check back in October. The official numbers will be released and you will be able to compare it with my predictions.
| 2009 | 2010 | 2011 | 2012 (estimated) | |
| 401k contribution limit | $16,500 | $16,500 | $16,500 | $17,000 |
| Catch-up contribution (for those 50+) | 5,500 | 500 | 5,500 | 5,500 |
| Total including catch-up | 22,000 | 17,000 | 22,000 | 22,500 |
Now I’m a little bit worried about my predictions, but last year it worked out and gave me some confidence. If you want some other financial measures to be predicted for 2012, just let me know. Now I hope that 401k maximum contribution limit will increase for a $500 as I predicted. Keep fingers crossed!
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March 25th, 2012 at 6:14 pm
imho 401k is much more flexible than any other plan – even with this 500 dollar increase in 401k contribution limits.
March 25th, 2012 at 7:56 pm
These predictions must be fulfilled; they can’t leave it flat for one more year – the rate of inflation became higher so 401k contribution limits must increase.
March 27th, 2012 at 8:59 pm
I’m happy that my company supports this plan. hope you predictions about contribution limits will come true
March 28th, 2012 at 4:50 pm
they really can increase contribution limitations, they were the same for 3 years. at least we can hope.
March 29th, 2012 at 5:05 pm
I like this thing about taxes, when contributions are made before withholding income tax from my paycheck. It make 401k a most beneficial one
March 29th, 2012 at 5:06 pm
I’m going to think about my future myself, i have no confidence in the employers and will be only glad if they increase contribution limits in 2012
March 29th, 2012 at 5:58 pm
These contribution limitations didn’t change during three years, they can’t stay the same forever, can they?
March 29th, 2012 at 6:09 pm
401k limits are not so easy to predict…hope your thoughts will work out!
March 30th, 2012 at 9:07 pm
2012 IRS rules should be a bit changed because of the level of inflation. We can certainly expect this…
March 30th, 2012 at 9:07 pm
The more the sum of 401k contribution limit, the higher possibility of to win smth for us. Hope all of you here are right.
March 30th, 2012 at 9:11 pm
After reading these predictions for 2012 IRS rules I started even to think about changing the employer, cause mine doesn’t offer 401k plan to us.
April 1st, 2012 at 8:04 pm
I’m gonna start thinking about my future now with 401k, no matter with 500 bucks increase in 2012 contribution limits or not…
April 3rd, 2012 at 12:12 am
Today we know that you were right. Contribution limits are 17000 now as I know.
April 3rd, 2012 at 12:20 am
Really good job. You were right and our expectations about 2012 IRS rules came true!
April 3rd, 2012 at 10:15 pm
you must be brave to make such predictions about contribution limits…although this exactly setuation was quite predictable because of inflation.
April 4th, 2012 at 10:38 pm
hah, 2012 401k limits are exactly the same you predicted!
April 5th, 2012 at 9:00 pm
Not very big increase in 2012 contribution limits, but increase is increase, you see.
April 7th, 2012 at 10:47 pm
You should start thinking about your future now, but everything is changing rapidly, so be sure you know all the details about limits and rules of your retirement plan.
April 10th, 2012 at 11:06 pm
as you see you were right about 2012 rules. Carry on!
April 18th, 2012 at 4:35 pm
It was good idea to predict contribution limits in 2012. So you were right. Are you going to predict 2013 limits now?
May 6th, 2012 at 10:32 pm
yeah, 2012 401k contribution predictions are right, so why not try with 2013 ones? I’ll be waiting for them!