Retirement Plan Contribution Limits Remain Unchanged in 2011
Employees saving for retirement are not getting any favors from the government this year. The contribution limits for the major employer-sponsored retirement plans: 401(k)s, 403(b)s (what is a 403b), and 457(b)s will not get an increase. That means like in 2010, the 2011 limit remains $16,500 for those under age 50. Those who are age 50 and older get the benefit of a catch-up contribution of an additional $5,500. Update: 401k limit 2013.
While this may not seem like a big deal if you don’t max out your contribution anyway, you have to wonder why. They say there isn’t enough inflation to warrant an increase, yet everywhere we look prices are rising. Not only that, but politicians remind us regularly that as a whole we aren’t saving enough and have problems with Social Security, yet no new incentives are ever put in place to encourage people to save more.
Going Beyond the 401(k)
Thankfully, we don’t need to rely on our employer-sponsored 401(k) plan. Don’t get me wrong, they are a great way to save and you should certainly take advantage of any matching contributions they might offer. But instead of relying entirely on an archaic section of the tax code you can put your retirement into your own hands. The ball is in your court.
First of all, do you have an old 401(k) sitting around from a previous employer? It’s time to do a 401(k) rollover into an IRA. Why leave your money tied up in an account that isn’t fully in your control? The plan administrator can change investments, fees, and plan features on a whim and you’re stuck with those changes as long as you’re with that plan. When you roll over your 401(k) you can choose what company to move the funds to and how you want to invest it.
If you don’t have an old 401(k) to roll over, it’s time to focus on your existing IRA. Don’t have one? Open an IRA today. Sure, the government also didn’t increase the IRA contribution limits, but it’s still better than nothing. If you’re looking for a tax break today, the Traditional IRA may be what you’re looking for. But if you’re hedging your bets and expect to have higher taxes or be in a higher tax bracket when you retire you’ll probably be looking at a Roth IRA.
Places to Invest
The options are almost endless. There are many investment companies to choose from and you can invest directly with a fund company, with a discount brokerage, or even a full-service branch. It all depends on what you’re looking to get out of your account and the level of service you need. Personally, I’m a do-it-yourselfer so I typically hold my accounts at discount brokers so I can keep my expenses low. Not only that, but I prefer to go with brokerage companies because within that single account I have the option to invest in individual stocks, bonds, ETFs, mutual funds, index funds, and even options, and do so for virtually free.
So, if you’re looking for flexibility and low transaction costs, here’s what I would recommend:
- Tradeking – Only a few cents more than Zecco, no maintenance fees on IRAs, and a great trading platform. Check out this TradeKing Review.
- Scottrade – 7 dollar trades, but they also have local branches all across the country if you prefer to meet with someone. Check out this Scottrade Review.
- Fidelity – Slightly higher trade commissions, but access to their incredibly low-cost index funds is nice.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.
