2012 IRS Maximum 401K Contribution Increase Announced
Update: The 2015 maximum 401K contribution has since been announced. The 2013, 2014, and 2016 401K maximum contribution amounts have also now been released since this post was written. What follows is for 2012.
The IRS 2012 401K maximum was officially announced, and there’s an increase in the contribution limit! Finally, some good financial news! Without further ado…
The Maximum 401K Contribution in 2012 is
$17,000! That’s right, we finally got an increase for the first time in 4 years from the IRS.
The 2009, 2010, and 2011 maximum 401K contribution limits had all been stuck at $16,500 prior to 2012 and 2013 increases. A 3% increase isn’t much, but I’ll take it. The last increase was when 2009′s 401K maximum had increased $1,000 over 2008′s $15,500 maximum.
403B and 457B plans will receive the same bump in limits in 2012.
The maximum 401K catch-up contribution per year for those over 50 years old, however, stays the same at $5,500 over the standard contribution limit in 2012.
The History of 401K Maximum Contributions
Believe it or not, the maximum contribution level has increased in all but six years going back to it’s beginning in 1987 (75% of the time). Three of those six years without an increase were the last three years.
It’s somewhat surprising we didn’t get increases while cost of living was seemingly trending upwards – but I guess that’s what happens when the government wants to encourage spending.
It’s also worth nothing that the maximum 401K contribution amount has never declined.
How to Max Out your 401K in 2012
If you would like to max out your 401K in 2012, take $17,000 and divide it by your total salary from your employer. For example, if you make $68,000 per year (includes bonuses), then take $17,000 and divide by $68,000 to calculate the percentage of your pay you would need to contribute to max out your 401K.
In the above example, it would be 0.25, or 25%. Next, work with your HR department or your 401K administrator update your 401K contribution percentage.
Going Beyond your 401K?
I realize not many folks will be able to contribute the maximum. If you do, however, it’s probably in the top 5 things you can do for your financial future, especially when a possible employer 401K match is at stake.
If you do max and want to contribute more, you can create a Traditional or Roth IRA. I moved both of mine to TradeKing, who has zero maintenance or inactivity fees and trades are only $4.95. If you have left an employer and have old 401K’s sitting around, you may want to consider a rollover. You’ll probably be saving money on fees in an IRA versus your 401K.
- Do you plan on maxing out your 401K this year or in 2012?
- Have you ever maxed out your 401K?