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Contribution limits largely unchanged
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You’ll probably hate me for bringing this up, but it’s time to begin planning for your 2011 taxes – or at least, about the tax implications of your retirement account contributions.
For the second year in a row, one widely used inflation measurement, the Department of Labor’s Consumer Price Index for Urban Consumers (CPI-U), remained flat for the quarter ending Sept. 30, 2010, compared to the same period a year earlier. That’s important because the IRS uses this measurement to determine whether dozens of tax-related numbers will stay the same or increase from year to year.
Bottom line: In 2011, most contribution levels remain unchanged. Here’s an overview of common retirement savings plans.
When it comes to defined contribution plans, the maximum annual contribution to 401(k), 403(b), 457(b) and federal Thrift Savings plans remains unchanged at $16,500 (plus an additional $5,500 if you’re at least 50).
Your plan may limit the percentage of pay you can contribute so, depending on your salary, your maximum contribution may actually be less.
Company-matching contributions don’t count toward your maximum contribution.
With pretax contributions, your account grows tax-free until withdrawn, at which point withdrawals are taxed at the rate then in effect.
With after-tax contributions, you pay income tax on the money now, but your contributions and their earnings will not be taxed at retirement.
With Individual Retirement Accounts (IRAs), the maximum annual contribution remains unchanged at $5,000 (plus another $1,000 if 50 or older). Contributions to a regular IRA are not impacted by your income, but if your modified adjusted gross income (AGI) exceeds certain limits, the maximum contribution to Roth IRAs gradually phases out:
• For singles/heads of households the phase-out range is $107,000 to $122,000 in AGI (up from $105,000 to $120,000 in 2010).
• For married couples filing jointly, it’s $169,000 to $179,000 (up from $167,000 to $177,000).
A few rules on deducting IRA contributions on your tax return:
• If you’re single, a head of household or married and neither spouse is covered by an employer-provided retirement plan, you can deduct the full IRA contribution, regardless of income.
• If you are covered by an employer plan and are single/head of household, the tax deduction phases out for AGI between $56,000 and $66,000 (unchanged from 2010); if married and filing jointly, it’s $90,000 to $110,000 (up from $89,000 to $109,000 in 2010).
• If you’re married and aren’t covered by an employer plan but your spouse is, the IRA deduction is phased out if your combined AGI is between $160,000 (s/b $169,000) and $179,000 (up from $167,000 to $177,000).
For more details, read IRS Publication 590 at
A final note: As an incentive for low- and moderate-income workers to save for retirement through an IRA or company-sponsored plan, many are eligible for a savers credit of up to $1,000 ($2,000 if filing jointly). This credit lowers your tax bill, dollar for dollar, in addition to any other tax deduction you already receive for your contribution.
Qualifying income ceiling limits for the Retirement Savers’ Tax Credit increased in 2011 to $55,600 for joint filers, $42,375 for heads of household, and $28,250 for singles or married persons filing separately. Consult IRS Form 8880 for more information.

Alderman directs Visa’s financial education programs.

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