Make sure you are deferring as much as you can afford to or what your own financial plan goals are. Here are the 2010, 2011 and 2012 retirement plan limits for your convenience.
|
Code |
2012 |
2011 |
2010 |
|
Section |
|||
|
IRAs |
|||
| IRA Contribution Limit – 219(b)(5)(A) |
5,000 |
5,000 |
5,000 |
| IRA Catch-Up Contributions – 219(b)(5)(B) |
1,000 |
1,000 |
1,000 |
|
IRA AGI Deduction Phase-out Starting at |
|||
| Joint Return |
92,000 |
90,000 |
89,000 |
| Single or Head of Household |
58,000 |
56,000 |
56,000 |
|
SEP |
|||
| SEP Minimum Compensation – 408(k)(2)(C) |
550 |
550 |
550 |
| SEP Maximum Compensation – 408(k)(3)(C) |
250,000 |
245,000 |
245,000 |
|
SIMPLE Plans |
|||
| SIMPLE Maximum Contributions – 408(p)(2)(E) |
11,500 |
11,500 |
11,500 |
| Catch-up Contributions – 414(v)(2)(B)(ii) |
2,500 |
2,500 |
2,500 |
|
401(k), 403(b), Profit-Sharing Plans, etc. |
|||
| Annual Compensation – 401(a)(17)/404(l) |
250,000 |
245,000 |
245,000 |
| Elective Deferrals – 402(g)(1) |
17,000 |
16,500 |
16,500 |
| Catch-up Contributions – 414(v)(2)(B)(i) |
5,500 |
5,500 |
5,500 |
| Defined Contribution Limits – 415(c)(1)(A) |
50,000 |
49,000 |
49,000 |
| ESOP Limits – 409(o)(1)(C) |
1,015,000 |
985,000 |
985,000 |
|
200,000 |
195,000 |
195,000 |
|
|
Other |
|||
| HCE Threshold – 414(q)(1)(B) |
115,000 |
110,000 |
110,000 |
| Defined Benefit Limits – 415(b)(1)(A) |
200,000 |
195,000 |
195,000 |
| Key Employee – 416(i)(1)(A)(i) |
165,000 |
160,000 |
160,000 |
| 457 Elective Deferrals - 457(e)(15) |
17,000 |
16,500 |
16,500 |
| Control Employee – 1.61-21(f)(5)(i) |
100,000 |
95,000 |
95,000 |
| Control Employee – 1.61-21(f)(5)(iii) |
205,000 |
195,000 |
195,000 |
| Taxable Wage Base |
110,100 |
106,800 |
106,800 |
If you don’t understand how the money is made, you are likely not holding the winning hand….
New York Times
Opinion
The Mutual Fund Merry-Go-Round
By DAVID F. SWENSEN
Published: August 13, 2011
“…This churning of investor portfolios hurts investor returns. First, brokers and advisers use the pointless buying and selling to increase and to justify their all-too-rich compensation. Second, the mutual fund industry uses the star-rating system to encourage performance-chasing (selling funds that performed poorly and buying funds that performed well). In other words, investors sell low and buy high.
Ill-advised buying and selling of funds costs the investing public a substantial sum. In 2010, Morningstar found that if mutual fund investors in 2000, as a whole, had simply bought and held their funds for 10 years, their investment outcomes would have improved by an average of 1.6 percentage points per year. That 1.6 percent may not sound like much, but it adds up to tens of billions of dollars per year. Another Morningstar study, in 2005, examined 10 years of returns for 17 categories of stock funds. In each category, the actual returns — after taking into account the ill-timed buying and selling — fell short of the returns that were advertised to the public. More stable funds performed better; more volatile funds performed worse….”
The summary –
- Don’t automatically sell…
- Work out essential living expenses now…
- Invest cash portion of your nest egg in FDIC -insured accounts…
- For the money you will need in 3-5 years consider….
I agree with most of the article but that is not personal financial planning advice…. Some of the strategies are expensive and don’t always work and that doesn’t quite come through loud and clear enough for my liking….
Which Way to Retirement? Follow These Steps
Wall Street Journal
Saturday/Sunday August 12-14, 2011
By Kelly Greene
There are many big problems that can perhaps be solved by innovation. Lets start focusing on the opportunities to make the pie bigger and pull ourselves out of this mess… with will and leadership this too can be solved…we all must imagine it first and then believe it, only then can it happen…..
“The bloated financial sector—all those brains lured by big bucks who might otherwise have been employed in science, software, engineering or other fields—has harmed the U.S. economy more than any of our post-World War II communist adversaries did. The American health system costs more per person than any other, but isn’t delivering the world’s healthiest people. The U.S. isn’t getting its money’s worth from either sector.”
The Wall Street Journal
Desperately Seeking Blueprint for Growth
August 4, 2011
by David Wessel
“The U.S. business model is broken.
One doesn’t often hear talk of a “business model” for the sprawling, diverse, market-driven U.S. economy. But—sometimes explicitly, sometimes implicitly—there is an economic-growth strategy that underlies government policy, investor bets and business and consumer behavior.
Ours isn’t working. Two years after the economy turned from contracting to expanding, output still hasn’t returned to prerecession levels. We’re still 10 million jobs short of full employment, and the fraction of adults at work, 58.2%, is at a 28-year low. The latest bad economic data have proved this isn’t the typical recovery, sparked fears of a double-dip recession and reinforced the case that old drivers won’t power future growth…
As Austan Goolsbee, the president’s departing economic adviser, argues, the U.S. shouldn’t aspire to return to the national business model of the past decade in which debt-fueled consumer spending and a housing bubble drove the economy. “We can’t just go back to what we were doing in the 2000s,” he said.
He prescribes a recovery “fueled by business investment, by export growth, by innovation.” Sounds good, but how do we get that?
Lurking beneath this week’s congressional debate were two alternatives. To oversimplify a bit, they go like this:
One view is that if the government steps back, the private sector will step forward…The alternative view is that the private sector is working only for a thin layer of winners at the top; government should play Robin Hood…
The usual columnist’s device at this point is to criticize both views, and segue to a wise alternative. That’s not my intent. The facts don’t favor the case that big government is crowding out the private sector now: There is so much unused capacity, so many idle workers, so much low-interest credit available at least to big companies (though the dearth of start-ups is a reason for worry.) And the facts show the gap between winners and losers in the economy has been widening for the past few decades…
The bloated financial sector—all those brains lured by big bucks who might otherwise have been employed in science, software, engineering or other fields—has harmed the U.S. economy more than any of our post-World War II communist adversaries did.
The American health system costs more per person than any other, but isn’t delivering the world’s healthiest people. The U.S. isn’t getting its money’s worth from either sector.”
More
This opinion piece’s title says it all… What can we each do to make sure we win together?
The New York Times
Win Together or Lose Together
August 6, 2011
by Thomas L. Friedman
“IN the wake of the hugely disappointing budget deal and the S.& P.’s debt downgrade, maybe we need to hang a new sign in the immigration arrival halls at all U.S. ports and airports. It could simply read: “Welcome. You are entering the United States of America. Past performance is not necessarily indicative of future returns.
Because our country is now finding itself in the worst kind of decline — a slow decline, just slow enough for us to keep deluding ourselves that nothing really fundamental needs to change if our future is to match our past.
Our slow decline is a product of two inter-related problems. First, we’ve let our five basic pillars of growth erode since the end of the cold war — education, infrastructure, immigration of high-I.Q. innovators and entrepreneurs, rules to incentivize risk-taking and start-ups, and government-funded research to spur science and technology…
Instead of doing that at the scale we needed — that is, building muscle — we injected ourselves with massive amounts of credit steroids (just like our baseball players)… All this debt blew up in 2008 in the U.S. and Europe, and that led to the second problem: Homeowners, firms, banks and governments are all now “deleveraging” or trying to — meaning that they are saving more, shopping less, paying off debts and trying to dig out from mortgages that are under water.
No one better explains the implications of this than Kenneth Rogoff, a professor of economics at Harvard, who argued in an essay last week for Project Syndicate that we are not in a Great Recession but in a Great (Credit) Contraction: “Why is everyone still referring to the recent financial crisis as the ‘Great Recession?’ ” asked Rogoff. “The phrase ‘Great Recession’ creates the impression that the economy is following the contours of a typical recession, only more severe — something like a really bad cold. … But the real problem is that the global economy is badly overleveraged, and there is no quick escape without a scheme to transfer wealth from creditors to debtors, either through defaults, financial repression, or inflation…
It typically takes an economy more than four years just to reach the same per capita income level that it had attained at its pre-crisis peak. … Many commentators have argued that fiscal stimulus has largely failed not because it was misguided, but because it was not large enough to fight a ‘Great Recession.’ But, in a ‘Great Contraction,’ problem No. 1 is too much debt…”
Our challenge now, therefore, is to deleverage the economy as fast as possible, while, at the same time, getting back to investing as much as possible in our real pillars of growth so our recovery is built on sustainable businesses and real jobs and not just on another round of credit injections…It will require the kind of collective action usually reserved for national emergencies. The sooner we pull together the better.
More
Wonderful car analogoy that “drives” home the point about company retirement plans….
JDSupra
The Need for Plan Sponsors to “Tune-Up” Their Retirement Plans
July 29, 2011
by The Rosenbaum Law Firm P.C.
“Taking care of a retirement plan is like taking care of a car, a plan sponsor has to perform maintenance of their retirement plan. Too many plan sponsors have a “drawer mentality” when it comes to their retirement plan, they put it in the back of their drawer and forget it. This type of mentality exposes the plan sponsor to potential liability because neglect of a retirement plan is a breach of a plan sponsor’s fiduciary duty as a plan sponsor.” More
Despite the headline, here is the crux of the article… “…Indeed, there is a large body of research showing that efforts to time the market tend to end badly for most investors. Nevertheless, the huge losses in the past week are sure to flame the debate about whether a more active approach is warranted given the extreme volatility of late….”
The Wall Street Journal
Timing the Market Works for Some Pros But is Risky for Average Joe
August 9, 2011
by Charles Passy and Alyssa Abkowitz
“…The industry’s term for adopting a more timing-oriented approach is “tactical management”; in a survey this spring by insurance company Jefferson National, about two-thirds of advisers said they planned to use it more often.
Even some advisers who have sworn by a buy-and-hold strategy in the past defend the need to move, saying extraordinary times call for extraordinary measures.
But the tactic is risky, especially for armchair investors, and many institutions and advisers are cautioning their clients against making any big changes in their portfolios. “If you have a good long-term investment strategy, over-reacting to short-term events could derail it,” T. Rowe Price cautioned in a research note posted on its website Monday.
Indeed, there is a large body of research showing that efforts to time the market tend to end badly for most investors.
Nevertheless, the huge losses in the past week are sure to flame the debate about whether a more active approach is warranted given the extreme volatility of late.
Of course, even advisers who favor an active approach will have to decide when to move back into the markets. And some see an opportunity in the current turmoil. “It’s a great chance to rebalance,” says David Peterson, president of Peak Capital Investment Services in Highlands Ranch, Colo. Bonds have rallied, Peterson explains, so investors can take some of those gains and reallocate them to now-cheaper stocks.”
More
Great article summarizing Roth re-characterizations…
The Wall Street Journal
Strategies for Taking Advantage of the Downturn
August 6-7, 2011
By Ben Levisohn, Laura Saunders and Kelly Greene
“There is no way to sugarcoat the market plunge of the past two weeks – it has been brutal.
The good news is that it isn’t forever. And in the meantime, there are ways for investors to take advantage of lower stock prices to pick up bargains, capture tax perks, maximize corporate stock awards and tweak retirement accounts.
- Look for Bargains
- Harvest Tax Losses
- Maximize Stock Options
- Make Gifts
- Tweak Your IRA
To convert from a traditional IRA to a Roth, you generally fill out a form requesting a transfer. The drawback is that you would owe income tax on the amount you convert for the year in which you do the conversion. (Last year was an exception.) And the move may not pay off unless you can pay the tax using money outside your IRA…
For example, say you have $250,000 in IRA assets ($200,000 in a rollover IRA from a 401(k) and $50,000 in another account), and the latter contains $40,000 in after-tax contributions. That means 16% of a conversion would be tax-free.
You also want to be careful “that you don’t jump yourself into a higher tax bracket” by doing a Roth conversion, says Vanguard’s Ms. Bruno. Say you are near the $139,350 income limit for the 25% bracket for married couples filing jointly, and you do a Roth conversion. Most of your conversion income could wind up being taxed at the 28% rate instead.
Consider opening a separate Roth for each type of investment you make. That way, you could “recharacterize” any laggards by switching back to a traditional IRA, and would no longer owe the conversion tax, says Ed Slott, an IRA expert in Rockville Centre, N.Y.
If you already converted, and the account balance has fallen, advisers suggest waiting a bit. IRA owners who did 2010 conversions have until Oct. 17 to switch back and erase the tax bill. After that, they would have to wait 30 days to reconvert. “If the market came back in those 30 days, you’d really be a loser,” Mr. Slott says.
More important, 2010 converters can spread their payments across their 2011 and 2012 tax returns—but if the assets were recharacterized and reconverted, all the taxes would be due in one year…”
Managing risk is a personal choice that every investor understands, views and handles (or ignores) differently . This article explains Journey’s point of view as it relates to managing the risks that are manageable.
Managing Investment Risk
DIMENSIONAL FUND ADVISORS
MAY 2011
“Investing can involve many types of risk, and investors may
define or focus on risk in many different ways. This paper
discusses aspects of three types of risk—concentration,
operational, and implementation—and describes
Dimensional’s approach to managing them.” More
Who Knew? The range of investment options for people who are strict socially responsible investors just got much, much better. Now you don’t have to make the tradeoff between socially responsible and rational and efficient. In the recent past, the only SRI funds available were actively managed funds with all their flaws and extra expense. If you don’t want to compromise, read on…
Financial Advisor
June 2011 issue
What You Might Not Know About Dimensional Fund Advisors
DFA is becoming a go-to source for financial advisors interested in SRI and sustainable investing.
By Jerilyn Klein Bier
“Dimensional Fund Advisors, a mutual fund manager with a knack for scientific research and a commitment to passive management, may not strike you as the crunchy granola type but it’s becoming a go-to source for financial advisors interested in sustainable and socially responsible investing.” More
