Several weeks ago, the IRS released pension plan limits for 2013, which sets the limits one can contribute to a 401(k), 403(b), and other retirement savings plans, as well as individual retirement account (IRA) limitations for traditional and Roth IRAs.
2013 401k limits
The maximum contribution limit for a 401k, 403(b), 457(b), or Government Thrift Savings Plan is increasing by $500 to $17,500. If you are 50 years old or older, you can contribute an additional $5,500 in 2013.
Traditional and Roth IRA s
With a traditional IRA contributions are tax deductible and the withdrawals made from a traditional IRA during retirement are taxable. For a Roth IRA contributions are made with after tax money, and the proceeds can be withdrawn tax free after reaching age 59 1/2. Due to the ever present talk of tax rates increasing in the future, many people find the Roth IRA more attractive, particularly if they are already contributing to a tax-deferred plan such as a 401k or a 403b.
2011 Traditional and Roth IRA limits
The maximum contribution limit for a Traditional IRA or a Roth IRA is also changing for 2013, increasing $500 to $5,500. The IRA contribution limits are increased in increments of $500 based on inflation, so if inflation has not increased enough, there would be no change in the contribution limit. If you are 50 years old or older, you can contribute an additional $1,000 in 2013, for a total of $6,500. Note that you can contribute to both a Traditional IRA or a Roth IRA in the same year, but the total for both cannot exceed the $5,500 maximum contribution limit ($6,500 for 50 yrs old and older).
Income Phase outs based on Adjusted Gross Income (AGI) for 2013 Traditional and Roth IRAs
- The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are active participants in an employer-sponsored retirement plan and have modified adjusted gross incomes (AGI) between $59,000 and $69,000, up from $58,000 to $68,000 in 2012. For married couples filing jointly, in which the spouse who makes the IRA contribution is an active participant in an employer-sponsored retirement plan, the income phase-out range is $95,000 to $115,000, up $3000 from 2012. For an IRA contributor who is not an active participant in an employer-sponsored retirement plan and is married to someone who is an active participant, the deduction is phased out if the couple’s income is between $178,000 and $188,000, up $5,000 from 2012.
- The AGI phase-out range for taxpayers making contributions to a Roth IRA is $178,000 to 188,000 for married couples filing jointly, up $5000 from 2012. For singles and heads of household, the income phase-out range is $112,000 to $127,000, up $2,000 from 2012.
- 2011 401k and Traditional and Roth IRA Limits
- Just in Case You’re Still Investing for Retirement- 2009 401k and Roth IRA Contribution Limits
- The Roth IRA: A Closer Look at a Powerful Wealth Building Tool
- The Two Simplest Ways for Graduates to Achieve Retirement Success