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Higher 401(k) Contribution Limits in 2012

Posted by Cheryl Costa  November 1, 2011 09:28 AM

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Starting in just two months, workers will be able to contribute even more to their employer's 401(k). Effective January 1st, the maximum contribution amount increases from $16,500 to $17,000 for workers under age 50. Workers age 50 and older can contribute as much as $22,500. These increases are the first permitted since 2009.

While these limits will be in effective for most people, it pays to check in with your benefits department because some companies limit contributions to a certain percentage of your salary. This is permitted by law but if you are unhappy about the situation, lobby for its change. Also, some highly compensated employees may find that they are not able to make the maximum contribution because of lower participation rates for the company's other employees.

While this increase is a good thing, studies have shown that only 5 percent of 401(k) participants contribute the maximum allowed and only 30 percent of workers age 21 to 64 contribute at all.

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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Local finance professionals share insights and advice on issues such as budgeting, managing debt, and retirement planning.

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D. Abraham Ringer is a CERTIFIED FINANCIAL PLANNER practitioner and a Financial Adviser with Morgan Stanley Global Wealth Management in Boston. He is registered in MA, NH, NY and several other states to which his articles are directed. For more information please visit www.morganstanleyfa.com/ringer
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