All you 401(k) investors, rejoice! Actually, the good news isn't just limited to 401(k) investors, but includes 403(b) investors, participants in the government Thrift Savings Plan (TSP), and most 457 plans, as well.
The IRS has increased the 401(k) contribution limit for the upcoming tax year to $17,000 from the current $16,500 to keep pace with inflation. This is part of its duties according to law, which requires that contribution limits are indexed to the inflation rate to keep pace with the cost of living, adjusting in $500 increments. These revisions to the retirement plan rules are for the fiscal year 2012 (which will be filed by April of 2013).
That means an opportunity to put more money aside for your golden years, while simultaneously taking advantage of tax-breaks that back out money put into the 401(k) plan from your Adjusted Gross Income. Saving an additional $500 per year may not seem like much, but for a 30 year old who hopes to retire at 65, it can mean an having an extra $69,000 to $171,000 in wealth by retirement depending upon the return earned by the investments in the account.
What about IRA contributions? I ask because my work does not provide a 401-k
I still contribute to my 401(k), but I’m considering turning off my contribution and possibly taking the money out now. My confidence has been shaken by talk by congressmen about confiscating private retirement accounts. Also, with given the astronomical federal and state budget deficits I think the tax benefits of tax-deferred accounts have evaporated. I think the future holds much higher tax rates.