So far this year, the fiscal cliff has been a real headline grabber, almost eclipsing what is surely welcome news for investors planning for retirement. That news—a 2013 increase in contribution limits for most types of retirement plans—enables millions of investors to save more for retirement and minimize their taxes at the same time.

It’s been a few years—2008, to be exact—since contribution limits for individual retirement arrangements (IRAs) were last increased by the IRS. That’s why the bump up in contribution limits, effective on January 1, 2013, is especially good news for anyone who has an IRA and wants to make the most of this tax-advantaged way to save for retirement.

Nor have the millions of Americans with defined contribution plans been left out. As it did with IRAs, the IRS also increased maximum contribution amounts for 401(k)s, 403(b)s and other plans, effective January 1, 2013.

Take a look at the numbers:


When it increased contribution limits, the IRS also tweaked other retirement plan details, such as eligibility, compensation limits and deductibility, for 2013. Best advice: check in with your wealth advisor, CPA and perhaps your tax attorney to determine how these changes might affect you.

Are you saving enough?

Although a $500 annual increase in the contribution limit this year might seem modest, those additional dollars may significantly add to your retirement assets over time.

That is especially critical these days because a longer life expectancy, vanishing company pensions and sobering questions about Social Security put the responsibility of retirement planning squarely on each individual. We all have a duty to take care of ourselves down the road, because we can’t absolutely count on traditional sources such as Social Security.

So, of every dollar that you make, you really need to put at least 12 cents of it into your retirement savings each year—no ifs, ands or buts. Given that benchmark, though, many people are falling short.

Save it and keep it

There is really no special secret to saving for retirement. It’s just what you have to do. You have homeowners insurance on your home to protect that asset. Paying into a retirement plan is what you have to do to protect your retirement. If you can automate those retirement savings, that’s even better. Pay yourself first; it can’t get much easier than that.

But being diligent about preserving those funds for retirement is equally important. It’s very tempting to borrow money from or take money out of your retirement fund for other things; after all, it’s right there. People always say, “I have plenty of time to make that up later.” Not only is that difficult or impossible to do, but in many cases, early withdrawals can trigger penalties and taxes—putting you further behind financially.

So, just because you can make a loan or withdrawal from your retirement account doesn’t make it a good idea. If you want to put your kids through college or need to buy a car or a house, you simply can’t rob your retirement to meet those goals.

How do you get started?

For people still sitting on the sidelines or fretting about whether or not they are doing enough for retirement, the advice is: Get going now rather than later. Take the first step by talking to a knowledgeable wealth advisor who can help you work through your own worries, needs, circumstances and goals to find a retirement saving solution right for you. Conditioning yourself to contribute adequately to your retirement account and preserving those funds just for retirement relieves a lot of stress you may be feeling these days about retirement.

Evans Atwell
Senior Vice President
Frost Private Banking