For Mark Roberts’ use: While it is always better to begin saving for retirement early in your career, rather than playing catch-up later, the reality is that many people have waited into their 40s or even 50s before thinking about retirement planning. Others may have saved faithfully for years, only to realize that their current savings simply won’t be enough to ensure a comfortable retirement. Whatever the scenario, it probably comes as good news to know that you still have time to catch up on retirement savings.
Those who are aged 50 or older can make up for lost time by taking advantage of catch-up contribution limits and maximizing contributions to retirement plans. For 2012, the IRA contribution limit was 5,000 dollars and the catch-up contribution limit was 1,000 dollars. While that extra 1,000 dollars may not seem like much, it can make a significant difference by the time you’re ready to retire. Since you have until April 15, 2013 to reach your 5,000 dollar limit or make a catch-up contribution of 1,000 dollars for 2012, it makes sense to do so now. Also, keep in mind that contribution limits for 2013 have been raised to 5,500 dollars (though the 1,000 dollar catch-up limit remains the same), so you might want to adjust your withholding accordingly and save that extra 500 dollars.
The 2012 contribution limits for many employer-sponsored retirement plans such as 401(k)s, 403(b)s, and 457s increased from 16,500 dollars to 17,000 dollars. If you didn’t contribute all the way up to this maximum during 2012, now is the time to do so if you want to take advantage in these changes to the tax structure.
For those who are concerned they have yet to save enough for retirement, taking advantage of these changing contribution limits is a great way to maximize savings without tax penalties. It’s important to remember that, due to compounding interest, even a small increase in yearly savings now will add up to a more significant savings in the future.
