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Inflation Brings Changes to Retirement Plans

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Cost-of-living adjustments have triggered changes to the dollar limitations for pension plans and other retirement-related items in 2012.

The increase in the cost-of-living index met the IRS thresholds requiring many of the limitations to be adjusted, but other limitations will not change.

Workplace retirement plans

finish line ahead
  • The contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan increases from $16,500 to $17,000.
  • The catch-up contribution limit for people aged 50 and over remains at $5,500.

Traditional IRAs

  • The deduction for taxpayers who contribute to a traditional IRA is phased out for single people and heads of household covered by a workplace retirement plan with modified adjusted gross incomes (AGI) between $58,000 and $68,000, up from $56,000 and $66,000 in 2011.
  • For married couples filing jointly, when the spouse who contributes to a traditional IRA also has a workplace retirement plan, the income phaseout range for an IRA deduction is $92,000 to $112,000, up from $90,000 to $110,000.
  • For a taxpayer who contributes to a traditional IRA and is not covered by a workplace retirement plan but is married to someone who is covered, the deduction is phased out if the couple’s income is between $173,000 and $183,000, up from $169,000 and $179,000.

Roth IRAs

  • The AGI phaseout range for taxpayers who contribute to a Roth IRA is $173,000 to $183,000 for married couples filing jointly, up from $169,000 to $179,000 in 2011.
  • For singles and heads of household who contribute to a Roth IRA, the income phaseout range is $110,000 to $125,000, up from $107,000 to $122,000.
  • For a married individual filing a separate return who contributes to a Roth IRA and is covered by a retirement plan at work, the phaseout range remains $0 to $10,000.

Saver’s credit

The AGI limits for the saver’s credit, also known as the retirement savings contributions credit, for low- and moderate-income workers are as follows:

  • For married couples filing jointly, $57,500, up from $56,500 in 2011
  • For heads of household, $43,125 up from $42,375
  • For married individuals filing separately and for single people, $28,750 up from $28,250


The rules and regulations in the Government Contracting industry are complex and Judy Lasley does an excellent job of educating me on how to wisely calculate, set and defend rates, as well as the long-term consequences of choosing the wrong rates.

John Cates |  President and Chief Executive Officer
Global Intelligence, Inc.