IRA Contribution Limits 2012 Compared For Qualified Retirement Plans

There are different IRA types, which are created to encourage all working people to make savings for their retirement. They are plans intended for the ordinary working class of people. Contributions are usually made from salaries. The rules for contribution and eligibility usually change every year. What are the differences between IRA types? Below are various types in different categories under which they fall.

Roth IRAs

  • The maximum contribution limit is $5000.
  • No taxes on dividends or capital gains.
  • All contributions aren’t tax deductible.
  • Individuals of 50+ in age can contribute an additional $1000.

Traditional IRAs

  • Maximum contribution limit of $5000.
  • Freedom to contribute an additional $1000 if you are 50+.
  • Gains are taxable on withdrawal.
  • No taxes on dividends or capital gains.
  • Contributions are tax deductible Simple IRAs.
  • A maximum contribution limit of $11,500.
  • An additional $2500 contribution if you are 50+.
  • Employers are required to make contributions.
  • Works similarly with 401k.
  • Employers make matching contributions of up to 3%.
  • Non-elective contributions should be 2% of an employee’s salary.


Maximum contribution limits for small business owners or self employed people should be 25% of the employee’s salary or simply $50,000 whichever is smaller

  • It has low administrative costs.
  • Contributions are deductible.
  • Has the highest contribution limits.
  • No additional contributions at the age of 50+.

For employees, SEP IRA allows them to make non SEP contributions. You can make contributions up to your maximum IRA limit. Contributions in this case are tax deductible.

IRA Contribution Limits for 2012

If you have a dream to invest for your retirement, then you need to know what IRA contributions limits are like. This ensures you know exactly what amount of money to set aside for this.

In case you are under the age of 50, there are specific IRA contributions limits for 2012 for contributors falling within your age bracket. The maximum you can contribute below 50 years is $5000. Setting aside this amount in time is the smartest way to approach the contribution task.

Individuals of 50 years and above can make a contribution of $6000. Also, anyone who is 50 years and above is allowed to make an additional payment of $1000 on top of the $5000. It can start anywhere after hitting 50, till they retire. It is a wise move making that extra $1000 of saving each year, because it is primarily free from any tax.

It is an excellent opportunity for you to maximize as a contributor, as the IRA contribution limits for 2012 are favorable. All you need to do is choose the plan that suits you and make maximum contributions that will be of benefit to you in the future.

Roth IRA Contribution Limit

The Roth IRA contribution limit is exactly the same as that of traditional IRA. It is simply $5000 to individuals of 50 years and below and $6000 to individuals of 50 years and above.

There are annual income limits for you to contribute to Roth IRA. It also depends on your status i.e. if you are single, married, separated or simply the head of the household. In this case your modified adjusted gross income (MACI) must range from $110,000 to $125,000. If your MACI exceeds $125,000, then you cannot make contributions anymore.

In case you are married and filing jointly or a qualifying widow, you can make a contribution when your MACI ranges from $173,000 to 183,000. If it exceeds $183,000, you cannot make any contributions any longer.

If you are married and filing separately and living with your partner, your MACI should range from $0 to $10000 to make a Roth IRA contribution.

401k Rollover Options

In case you are employed and considering a 401k rollover option, you have the freedom. You can literary rollover an IRA from any given account to the other at any time. This, however, depends on the circumstances. If it is a corporate layoff or if you are changing jobs the terms of rollover will be different. This simply means each type of job has different terms that one should ensure they are aware of before making any steps relating to this.

In case you fall between the age of 59 and 70; you have an option for lump sum distribution. Your 401k plan provider should write you a check reflecting the value of your account less 20%. The 20% is a withholding tax, and the IRS mandates it. The deducted percentage is counted against any income tax payable. Still, you can opt not to do anything and leave your savings with your former employer, provided the amount is greater than $5000. Amounts less that this gets distributed to you irrespective of your age.

For that individual below 59 the options will be taking a lump sum distribution. A 20% withholding tax is charged, and the IRS mandates it. An additional 10% withdrawal penalty is charged. The 20% is withheld, but the penalty is not. This means only the 20% charge gets counted against the income tax payable. You can opt to leave your contributions with your former employer untouched. The sum should be above $5000. Amounts less than this get distributed to you too regardless of age, but they are always less the 20% withholding tax.

If you are 70 years of age or older, your 401k service provider simply writes you a check reflecting the exact value of your contributions account, less a withholding tax of 20%. This deducted tax percentage is held against the income tax payable. Alternatively, you can decide to leave it with the employer 401k plan but commence taking the set minimum distribution. You can leave the sum with your former employer too, provided it is above $5000. In case you opt for this, a 50% of the set minimum distribution is taxed. Amounts falling below $5000 get distributed to you irrespective of your age.

You need to consider all IRA contribution limits for 2012 to ensure you plan your future well. Know these limits to make a responsible contribution that is sure to secure your future. It is important to seek information from quality IRA sites like this one to ensure you make the right choices regarding your contributions. Get tips too on the best things you can do with your IRA account with all the information you are in better position to determine what suits you best. It is also advisable to all get information relating to the same from reliable sources to avoid the major blunders that people make.

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