In preparing to write this post, I realized that the very first post I wrote on any topic was published on New Year's Eve of 2005, pertaining to important limits for 2006. I think I've done some version of that every year since, and it's time to do it again.
This is a brief list of selected limits which may be relevant in your effort to maximize your wealth in 2012.
For 2012, the maximum 401k contribution has been increased to $17,000. For individuals who turn 50 before the end of 2012, the law allows for an additional $5,500 to be contributed, which increases the overall limit to $22,500 for those over 50.
IRA contributions and limits
The maximum IRA contribution in 2012 remains at $5,000. Individuals who turn 50 before the end of 2012 can add another $1,000 under the catch-up limit. This maximum applies to regular IRAs as well as Roth IRAs, and can be split between the two.
Income limits for contribution to a Roth IRA are as follows (in other words, if your income exceeds these levels, you cannot contribute to a Roth IRA):
$125,000 if you file as a single taxpayer
$173,000 if you are married filing jointly
Income limits for Traditional IRA deductibility
If you are covered by a retirement plan at work, you can take a deduction for traditional IRA contributions if your income does not exceed:
$68,000 for taxpayers filing as single or head of household
$92,000 for married filing jointly
If you are not covered by a retirement plan at work and...
- you're single, you can deduct an IRA contribution regardless of your income level.
- you're married and your spouse is not covered by a plan at work, you can deduct regardless of your income
- you're married filing jointly and your spouse is covered by a plan at work, you can deduct your contribution if your combined income is less than $173,000
COLA - Cost-of-Living Adjustment
For the first time since 2009, Social Security benefits will increase by 3.6% to reflect the impact of inflation. Of course, retirees who just paid 13% more for a standard Thanksgiving dinner
may take issue with the amount of the increase, many seem to be happy that they'll be receiving more than they have in 2011.
Earnings subject to Social Security tax
The wage base on which workers must pay Social Security taxes will increase from $106,800 to $110,100. Ignoring the impact of a possible payroll tax cut extension, the rate for this tax remains at 6.2%, so earners at or over this income level will pay $6,826.20, which is about $200 more than in the past few years.