Take Advantage of Catch-up Contributions
Give your retirement savings a boost and help make up for lost time.
Somewhere between raising children and meeting day-to-day expenses, your retirement funds may have fallen short. If you're behind, you can make contributions that may allow you to "catch up" for years you might not have been contributing as much. Catch-up provisions enable you to make additional contributions to your organization's retirement plan* or individual retirement account (IRA) as you near retirement.
"Ongoing market volatility has left many pre-retirees with far less money than they were counting on," says Bob Croy, a financial advisor with Lockton Financial Advisors based in Kansas City. "While investors can't control the market, they can take an active role in maximizing their contributions. Take advantage of retirement contribution limits by putting away as much as possible each year."
Catch-up contribution limits
In 2012, individuals can make a maximum annual contribution of $17,000 to their organization's retirement plans. In 2013, this will increase to $17,500. If you're age 50 or older, you also may be eligible for a catch-up contribution of $5,500.* Common catch-up provisions include:
|Plan||Annual contribution limit||Catch-up contribution*,||Total contribution|
|401(k)/403(b)||$17,000 for 2012; $17,500 for 2013||$5,500||$22,500 for 2012; $23,000 for 2013|
|Individual retirement account (IRA, traditional & Roth)||$5,500||$1,000||$6,500|
|SIMPLE** 401(k) & SIMPLE IRA||$12,000||$2,500||$14,500|
Maximize your annual contributions
If you're 50 or older, the catch-up provision can provide a great opportunity to contribute more for retirement, especially if you haven't been able to contribute the maximum amount each year in the past. The pre-tax contributions also allow you to reduce even more of your current taxable income.
To be eligible for catch-up contributions in any given year, you first must meet the maximum annual contribution IRS limit or that for your organization's retirement plan.*
Calculate your deferral amount
While making catch-up contributions is important, increasing the amount you're saving through a lump sum contribution may not always be easy. Looking ahead, consider increasing your contributions early in the year when you can.
Get started today.
Log in to the account to review and update contributions to your organization's retirement plan. If your plan doesn't allow contribution changes to be made online, see your employer. Contact your financial professional to discuss IRA contributions.
Fast Fact: In 2002, 54 percent of Americans said they feared not having enough money in retirement. By April 2011, the number leapt to 66 percent, according to annual Gallup polls.
* Some plans may not allow catch-up contributions to the plan.
** Simple IRA and Simple 401(k) plans are available to employers with 100 employees or less.
Bob Croy and Lockton Financial Advisors are not affiliated with the Principal Financial Group® or any of its member companies.
Insurance products and plan administrative services are provided by Principal Life Insurance Company a member of the Principal Financial Group® (The Principal®), Des Moines, IA 50392.
t1110060c15 [From Winter 2011 Plan Ahead. Get Ahead.]