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2012 Limits That Could Impact Your Paycheck Next Year

The IRS and the Social Security Administration released a bunch of 2012 limits for us to sort through. Here are the limits that I find most meaningful to readers. And when I say most meaningful, it really boils down to the ones that impact your paycheck: retirement contributions, health plan contributions, and social security taxes and benefits.

Many of the limits that are going up for 2012 are based on the increase in the cost of living (COLA) index. However, even though the index went up, some of the limits weren’t adjusted. Here’s a rundown on what will change and what is staying the same.

2012 Retirement Account Limits

Now you can plan your 2012 contributions to all of your retirement accounts:

  • 2012 401k Limits [1]: The 2012 limits for 401k plans (both Roth and traditional) will go up from $16,500 to $17,000. This limit also applies to 403b plans and 457 plans for 2012. In order to take advantage of the increase, you’ll need to change your election with your employer to a higher deduction amount.
  • 2012 IRA Limits [2]: The 2012 limits for IRAs (Roth and traditional) will remain unchanged at $5,000. And while your IRA contributions probably don’t come out of your paycheck, I think it’s still important enough to make the list!
  • 2012 Catch-Up Contributions [3]: 2012 Catch up contributions for both IRAs and 401ks will remain the same as last year – $1,000 for IRAs, and $5,500 for 401ks. If you’ve hit your 50s (or over), be sure to take advantage of the higher limits.
  • 2012 SEP-IRA Limits [4]: The 2012 SEP IRA limits will go up from $49,000 to $50,000 (as long as you don’t exceed 25% of compensation). Just make sure you review the calculation carefully, as the 25% is based on net profit, not gross revenues.
  • 2012 SIMPLE IRAs [5]: The 2012 limits for SIMPLE IRAs remain unchanged at $11,500, as does the SIMPLE catch up contribution at $2,500.

2012 Health Benefit Plan Limits

If you are working on your open enrollment [6] paperwork this week, be sure to review the 2012 limits for the following health plans changes:

  • 2012 Health Savings Account Limits [7]: Individual HSA contributions will increase from $3,050 in 2011 to $3,100 in 2012. Family HSA limits will increase from $6,150 in 2011 to $6,250 in 2012.
  • 2012 High Deductible Health Plan Limits [8]: Maximum out of pocket spending limits for 2012 will increase to $6,050 for single and $12,100 for family. The minimum HDHP deductibles remain the same at $1,200 for single and $2,400 for family.
  • 2012 Flexible Spending Account Limits [9]: As we previously mentioned 2012 will be the same as last year with no federal FSA limits (your employer can still designate a limit). There will be a $2,500 maximum per employee in 2013.

2012 Social Security Limits

Social Security is going up, both for people paying in, and people taking money out:

  • 2012 Social Security Wage Base Limits [10]: The 2012 Social Security wage base is going up for the first time in a few years. The wage base in 2012 is $110,100. It’s an increase over the 2011 Social Security wage base, which was $106,800. What it means is that you’ll pay additional Social Security taxes in 2012 on the extra $3,300 in wages.
  • 2012 Social Security Benefits [11]: Social Security benefits will increase 3.6%. There hasn’t been a benefit increase since 2009. Good news if you’re currently receiving social security benefits.
  • 2012 Social Security Payroll Tax Limits [12]: We still don’t know if the 2% Payroll Tax Cut [13] we have this year will be extended into 2012. Once we know that, we’ll be able to more accurately calculate the amount of Social Security tax taken out of your paycheck.

Based on the new 2012 limits above, you should be able to calculate most of what your paycheck will look like in the new year.

Which limit change are you the most excited about?