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Tuesday, October 23, 2012

Don’t’ Forget Your 401(k) as You Plan for the Year End

With just a couple of months remaining in 2012, it’s a great time to make sure you are getting the most out of your 401(k) plan. Maxing out a 401(k) or other employer-sponsored retirement plan has long been a staple of tax planning. Unlike IRAs, contributions to a 401(k) or 403(b) plan generally must be made by the end of the calendar year.

For 2012, the maximum you may designate to your 401(k), not including any matching contribution from your company, is $17,000. If you are age 50 and older, you can contribute an additional $5,500. The total contribution limit, including employer contributions, is $50,000.

Even if you don't max out your retirement plan to take advantage of the tax savings, you may want to review your retirement plan's asset allocation, investment options, and your contribution levels just to be sure that the plan fits in with your overall savings strategy. If you have employees, this is also an excellent time to remind them of the tax advantages associated with having a retirement plan.

Don’t have a 401(k)?
Consider starting a retirement plan before the end of the year. It will help your employees save for the future, help you attract and retain qualified workers and even gain significant tax advantages for your business and for those participating in the retirement savings plan. It’s relatively inexpensive to start a plan, and there are significant tax credits to offset the costs of establishing a workplace savings plan. A plan can be put in place in less than a week and will only require about an hour a month of on-line maintenance. And imagine how good you will feel knowing you wrapped up 2012 by taking a significant step toward ensuring you’ll have a secure retirement!

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