Know Retirement Plan Limits

Submitted by Jim Blankenship on Monday, December 9, 2013 - 3:00pm
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Before you feed your retirement accounts next year, here’s a look at contribution-limit changes big and small.

The IRS recently published contribution limits for various retirement plans for 2014. Indexed to inflation, these new limits sometimes do not increase much year over year and sometimes not at all.

This year saw virtually no increases for most contribution amounts. As usual, income limits did increase for most types of accounts.

Individual retirement accounts. The annual contribution limits for both traditional 401(k) and Roth IRAs remain at $5,500. The catch-up additional contribution amount for folks 50 or older also stays at $1,000.

Income limits rise slightly, though. For singles covered by a retirement plan, your adjusted gross income (AGI) must fall under $60,000 for a full deduction and $70,000 for a phased deduction, an increase of $1,000 over 2013 limits.

Married folks filing jointly (MFJ) and covered by a retirement plan of an employer see their AGI limit increase $1,000, to $96,000 and to $116,000 for a phased deduction. Marrieds filing jointly with one spouse not under a workplace retirement plan face an AGI limit for deduction of $181,000 and $191,000 for a phased deduction, an increase of $3,000 over 2013.

Income limits for Roth IRA contributions also jump. Single folks with an AGI less than $114,000 can make a full contribution; this phases out up to an AGI of $129,000, an increase of $2,000 at each end of the range. For marrieds filing jointly, AGI limits rise $3,000, to $181,000 to $191,000.

Other types of accounts. For traditional employer-based plans, deferred income allowed remains the same as well. For 2014, employees can defer up to $17,500 with a catch-up amount of $5,500 for those over age 50.

If you work for a governmental agency such as a school or other nonprofit with a 457 plan in addition to a 401(k) or 403(b) plan, you can double up and defer as much as $35,000 plus catch-ups, for a total of $46,000.

Contribution limits for Roth 401(k) and Roth 403(b) plans are the same as for traditional plans. You may contribute up to the limit for either a Roth or a traditional plan or for a combination of the two.

Deferral limits for savings incentive match plans for employees (SIMPLEs) remain unchanged at $12,000 for 2014, as does the catch-up amount of $2,500, for folks at or older than age 50.

Saver’s credit. Income limits for receiving the retirement savings contribution credit, or saver’s credit, increases. The AGI limit for MFJ jumps $1,000, to $60,000. For singles the new limit goes up $500, to $30,000, and for heads of household the AGI limit hits $45,000, an increase of $750.

The saver’s credit rewards low- and moderate-income taxpayers who need help saving for retirement. This table details how the saver’s credit works (note that Form 8880 is not updated yet for 2014, so the figures for the 50% and 20% limits will likely change):

Amount of Credit

Married Filing Jointly

Head of Household

Single/Others

50% of first $2,000 deferred

$0 to $35,500

$0 to $26,625

$0 to $17,750

20% of first $2,000 deferred

$35,501 to $38,500

$26,626 to $28,875

$17,751 to $19,250

10% of first $2,000 deferred

$38,501 to $60,000

$28,876 to $45,000

$19,251 to $30,000

 

The last 12 months constituted no earthquake year for contribution change. Even little changes cost or save you a lot.

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Jim Blankenship, CFP, EA, is an independent, fee-only financial planner at Blankenship Financial Planning in New Berlin, Ill. He is the author of An IRA Owner’s Manual and A Social Security Owner’s Manual. His blog is Getting Your Financial Ducks In A Row, where he writes regularly about taxes, retirement savings and Social Security.

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