Contribution Limits, Some Good News for Savers in 2013


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by FPA member, Jeanne Gibson Sullivan, CFP®  
Last Updated: December 17, 2012

Contribution limits are rising in 2013 for retirement plans.  The cost of living index met the thresholds that trigger such an adjustment.  The old and new limits are:

401(k), 403(b) and most 457 Plans

  • $17,000 is the 2012 elective deferral (contribution) for employees
  • $17,500 will be the 2013 elective deferral (contribution) for employees
  • $5,500 is the catch-up amount allowed for individuals over age 50 and remains the same

SIMPLE IRA for small businesses

  • $11,500 is the 2012 contribution limit
  • $12,000 is the 2013 contribution limit
  • $2,500 is the catch-up contribution amount allowed for individuals over age 50 and remains the same

Individual Retirement Accounts (IRA)

  • $5,000 is the 2012 annual contribution limit to an Individual Retirement Account (IRA)  
  • $5,500 will be the 2013 annual contribution limit to an IRA (there are no income limits to contributing to a traditional IRA)
  • $1,000 is the catch-up amount allowed for individuals over age 50, which remains the same
  • Deductions for IRAs: Some individuals are allowed a tax deduction for IRA contributions who also have workplace retirement plans based on the level of adjusted gross income (those limits are also rising so check with your tax preparer for more details)

Roth IRA Contribution Limits:

Individuals with income limits below a certain level are allowed to contribute to a Roth IRA. Income from a Roth IRA grows tax-free and is not taxable when withdrawn in retirement.  The maximum contribution is the same as for traditional IRAs ($5,500 in 2013 and $1,000 catch-up for those over the age of 50).  Individuals who are eligible may choose to contribute to either a traditional IRA OR a Roth IRA, but not both. The 2013 adjusted gross income phase-out range for Roth IRA contributions is:

  • $178,000 to $188,000 for married couples filing jointly
  • $112,000 to $127,000 for singles and heads of households

Those with incomes below the lower number above may contribute the full amount to a Roth IRA, those with incomes above the higher number may not make a Roth IRA contribution.  For those within the range, they may contribute a portion of the full amount.

There are additional rules for IRAs, so please check with your tax preparer or human resources department before making adjustments to your retirement contributions.

Jeanne Gibson Sullivan, CFP ® is an FPA member and a financial planner.  She is the founding principal of Financially in Tune in Wakefield, MA.  

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 FPA All Rights Reserved

This article appears in: Personal Finance , Retirement

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