Rule changes for IRAs, 401(k)s & other savings vehicles.
The IRS has made minor adjustments to retirement plan limitations for 2014. As inflation has been tame in 2013, the cost of living adjustments aren’t dramatic. The majority of retirement plans won’t see any changes next year; however, there are a few adjustments to note.
IRAs: The 2014 contribution limit is still set at $5,500, with an additional $1,000 catch-up contribution permitted for those ages 50 and older.
The AGI phase-out ranges affecting the deductibility of traditional IRA contributions have been increased slightly. Workers whose income falls between the ranges below may be permitted reduced contributions.
- Single & head-of-household filers covered by a workplace retirement plan: $60,001-70,000
- Married filing jointly, you contribute to a workplace retirement plan: $96,001-116,000
- Married filing jointly, spouse contributes to workplace plan, you don’t: $181,001-191,000
The limits on eligibility to make Roth IRA contributions have been adjusted. Full Roth contributions up to the limit are permitted in 2014 if adjusted gross income does not exceed the following limits. For those whose income does fall in the range, reduced contributions may be allowed.
- Single & head-of-household filers: $114,000 (phase-out range is $114,001-129,000)
- Married filing jointly: $181,000 (phase-out range is $181,001-191,000)
401(k)s, 403(b)s, most 457 plans & the federal Thrift Savings Plan: Contribution limits on these plans are unchanged for 2014. Contributions of up to $17,500 are allowed in these accounts next year for those younger than 50. Workers who are age 50 and older are permitted a $5,500 catch-up contribution for a total limit of $23,000.
SEP & SIMPLE plans: SIMPLE-IRA plans see no changes to contribution limits next year: the maximum plan contribution remains at $12,000 for 2014, with catch-up contributions still limited at $2,500. The SEP-IRA contribution limit to employee accounts is the less of 25% of compensation or $52,000.
Profit-sharing plans: The 2014 deferral limit is $17,500, the catch-up contribution limit is $2,500, the compensation limitation is $260,000, and the maximum contribution amount across multiple plans is the lesser of a) 100% of compensation, b) $52,000 if younger than 50, or c) $57,500 if 50 or older.
Income limits for the saver’s credit are slightly increasing. This federal tax credit is offered to low-income and middle-income workers saving for retirement. In 2014, you will be eligible for the credit if your AGI doesn’t exceed these thresholds:
- Married filing jointly: $60,000
- Head of household: $45,000
- Married filing separately & single filers: $30,000
View our 2014 Tax Guide here