If you’re looking to maximize your retirement savings, you need to know about the changes happening to your 401k plan in 2013. The rules for 401(k)s often change, and the IRS announced alterations to these retirement plans back in October 2012.
There’s some great news if you’re looking to get the most out of your retirement fund, as we see next.
You’ll benefit from a higher 401k contribution limit in 2013
If you want to maximize the amount that you save into your 401k plan, the good news is that the contribution limit for your plan will rise in 2013. The contribution limit for 401(k) plans, 403(b) plans, and the federal government’s Thrift Savings Plan will increase from $17,000 in 2012 to $17,500 in 2013.
In the past seven years, the contribution limit to a 401k plan has increased significantly, from $15,500 in 2007 to $17,500 in 2013.
Garth Scrivner, a certified financial planner and senior investment counselor for StanCorp Investment Advisers in Albuquerque, N.M, says: “One of the best ways to take advantage of the increased limits is to perform a year-end checkup of your 401(k) and make sure that you are contributing the maximum allowable by law. “One strategy to avoid the pain of increased savings is to consider giving your 401(k) contribution a raise at the same time your annual pay raise occurs.”
While a $500 rise in the contribution limit may seem like a negligible amount, it could make a significant difference to the size of your pension fund when you retire. As the Daily Finance says: “An extra $500 may not sound like much, but having the flexibility to boost your retirement savings could result in your having a lot more than $500 extra by the time you retire.”
No change to ‘catch-up’ limits
While the amount that you can contribute to your 401k plan will rise in 2013, you won’t be able to pay any more to ‘catch-up’ contributions.
If you are aged 50 or over, the catch-up contribution limit for your 401k plan will remain unchanged in 2013, at $5,500.
You’ll get more information on your 401k fees
If you pay into a 401(k) plan, 2013 is the first full year that you will receive quarterly and annual statements listing the fees charged to your accounts. You will also receive a document showing your 401k plan’s returns compared to a benchmark. This is all due to new Labor Department regulations that went into effect in 2012.
“Next year, the biggest changes will be a continuation of the new disclosure rules regarding fees that are just hitting participant statements now,” says Rick Meigs, retirement savings expert. “You are going to get an annual notice and you are going to start seeing more disclosure of fees and costs on your quarterly statements.”
You will be able to use these statements to evaluate whether the funds you are investing in are worth the fees you are paying. They will also help you make decisions on changing your investment funds if appropriate.
Will these changes affect your retirement savings in 2013? Let us know in the comments below.