The Internal Revenue Service (IRS) has announced that workers will be able to contribute more money to their 401(k) retirement plans in 2012 if they choose to do so.
Under the new 401(k) structure employees in 2012 will be able to contribute up to $17,000 without paying upfront taxes. The $500 increase over 2011 ceiling limits is meant to adjust for inflation and was required by law. An increase in the ceiling had not been witnessed since 2009 because inflation was too low to trigger the increase.
According to Plan Sponsor Council of America of the 60 million American’s who contribute to a 401(k) annually approximately 6% fulfill the maximum amount.
Company’s have the ability to lower the maximum contribution amount on their own and 14% of organizations do set lower limits, in many cases because those company’s have simply failed to update their retirement limits based off old 401(k) rules. Under the rules of former plans contributions were capped at 15 percent of an employees salary.
Increases in the 401(k) structure are important for our economy since they help invest in various sectors of the market and are used by thirty-three percent of workers between the ages of 21 to 64.
Do you plan to contribute the maximum 401(k) amount for your retirement savings account this year?