2012 401k, 403b and IRA Contribution Limits

The IRS places limits on how much you can defer into a qualified retirement plan each year.  Employees are encouraged to save via pre-tax and/or Roth contributions, but they cannot go over the limits set by the IRS.  If you do exceed the contribution limits, your employer plan (401k or 403b) should return the funds to you, otherwise your account may be penalized.  It’s also good to note that your company match or employer contributions do not count towards the IRS limits for employee contributions.

2012 Contribution Limits for 401k and 401b Accounts

In 2011, the limit for employee deferrals was set at $16,500 – a figure that hadn’t changed for three years.  In 2012, the limit will be raised to $17,000 allowing you to contribute $500 more into your company retirement plan.

If you are over 50 years of age, you can contribute an additional $5,500 as a catch up contribution, making the total for 2012 equal to $22,500.

Special provisions with 403b accounts (retirement plans for non-profit organizations like hospitals, churches, and schools) allows you to make an additional ‘years of service’ contribution.  If you have 15 years of service with a school, hospital, or church, you may be able to contribute an additional $3,000 to your 403b account.  You can read more on the IRS ‘years of service’ provision here.  If you think you’re eligible for this provision, check with your HR department.

2012 Contribution Limits for IRAs

Both the Roth IRA and Traditional IRA follow the same rules for contribution limits.  If you’re under 50 years of age, you are allowed to contribute $5,000 to an IRA in 2012.  If you’re over 50, you can contribute $6,000 to an IRA.  The contribution limits did not change for 2012.

Roth IRA Income Limit Changes

There were, however, changes in the income limits for Roth IRA contributions.  The AGI phase-out range changed as follows:

Married Filing Jointly -$173,000-$183,000 (up from $169,000 to $179,000 in 2011)

Single Head of Household- $110,000 to $125,000 ($107,000 to $122,000 in 2011)

Retirement Savings Contribution Credit

If you are married, make less than $57,500 and file jointly, you are eligible for the savers credit.  (2011 income limit was $56,500).

Head of household income limit for the saver’s credit is $43,125 (up from $42,375 in 2011)

Married individuals filing separately (including single filers) can make up to $28,750 and receive the saver’s credit (up from $28,250 in 2011).

In summary:

• The 401k and 403b contribution limits increased by $500 in 2012.
• IRA contribution limits remained the same ($5,000 / $6,000 over 50)
• Roth IRA income limits increased slightly.
• Savers credit income limit increased by $1,000 for married couples and $750 for individuals.

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