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Maximium 401(k) Contribution Raised For 2012

For those looking for an easier way to save more money, the IRS announced some good news today: You can contribute more pre-tax money to your 401(k) next year.

The pre-tax contribution workers can make to their 401(k) next year is $17,000, up from $16,500 this year. For savers 50 and up, the catch-up amount remains unchanged at $5,500, so your pre-tax contributions each year max out at $22,500.

“Anyone who can afford to up their contribution should,” says Angela Thomson, CFP, Coastal Financial Planning, Inc.  “The reality is retirement is more expensive than most project, and we have serious flaws with the social security system.”

This is the first time since 2009 that the IRS has raised the contribution ceiling, as in previous years, inflation was too low to warrant an increase.

The new rule applies to 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan.


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About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.