Are you planning for 2014 with regards to your retirement accounts? If so there are some things you need to be aware of before you proceed as you have in the past. In recent years the amounts you can contribute to retirement accounts has been adjusted for inflation. Well in 2014 that is not going to be the case as the levels will remain the same as the 2013 contribution limitations. That means the amount you may contribute to your 401(k) and IRA’s will not get an inflation adjustment in 2014.
The limits for 401(k), 403(b), 457 plans and the federal government’s Thrift Savings Plan are going to again be limited to $17,500 for the tax year. If you are over the age of 50 you are allowed an additional $5,500 in catch up funds for a total contribution limit of $23,000. Limits for IRA’s will also be the same as 2013 levels with maximum contributions of $5,500 for the tax year. And like retirement plans at your place of employment you are allowed an additional $1,000 catch up if you are over the age of 50.
While the contributions levels did not change from 2013 to 2014 the IRA limitations have. For people who have workforce retirement plans the tax deduction on Traditional IRA’s is phased out as adjusted gross income is between $60,000 and $70,000 and for married couples with AGI between $96,000 and $116,000 having been increased by $1,000 over 2013 levels. For ROTH IRA’s the phase out has been increased by $2,000 for AGI between $114,000 to $129,000 for single people and head of household filers and married couples now have a phase out of AGI between $181,000 and $191,000.
In the event you do not qualify for a ROTH IRA you may still make contributions to a Traditional IRA that is nondeductible and convert it to a ROTH IRA with the understanding that the conversion amount may be taxed. Also if your employer offers a ROTH 401(k) or similar plan there are no income limitations on the participation in a ROTH retirement account at your workplace. Provided of course that a ROTH option is offered where you work as more and more employers are adding this option to the choices employees have in their retirement accounts.
As pensions and social security become increasingly uncertain it is never too late to start or too early to begin saving for your retirement. As the younger workers will see as they continue through their careers we as individuals will become more instrumental in our own retirements. For more information on the tax implications on your retirement accounts for 2014 please see the following link.
