Mary Beth Franklin

Retirement 2.0blog

Mary Beth Franklin - also known as the 'client whisperer' - on what your clients really want when they talk about retirement.

Retirement plan limits less limited next year

But catch-up contribution caps for workers 50 and older remain unchanged

Oct 24, 2012 @ 9:23 pm

By Mary Beth Franklin

Retirement plans
+ Zoom

American workers will be able to contribute slightly more to their 401(k)s and other employer-based retirement plans next year, as well as to their Individual Retirement Accounts, the Internal Revenue Service announced this week.

The maximum contribution for employees who participate in 401(k), 403(b), most 457 plans, as well as the federal government's Thrift Savings Plan, will increase to $17,500 in 2013, up from $17,000 this year due to cost-of-living adjustments. However, the catch-up contribution limit for employees aged 50 and older who participate in employer-based retirement plans remains unchanged at $5,500. That means workers 50 and older can contribute up to $23,000 to their 401(k) or similar workplace savings plans in 2013 up from $22,500 this year.

The limit on annual IRA contributions will increase to $5,500 in 2013, up $500 from this year. However, catch-up contributions for individuals aged 50 and older who contribute to an IRA will remain at $1,000, the same as this year.

Income limits for making tax-deductible contributions to an IRA, as well as income-eligibility limits for contributing to a Roth IRA, also will increase in 2013.

Single workers who contribute to a traditional IRA and who are covered by a retirement plan at work can deduct their full IRA contribution up to $5,500 as long as their modified adjusted gross income does not exceed $59,000 in 2013, up from $58,000 this year. They can deduct a partial contribution if their income is between $59,000 and $69,000 next year.

Married individuals can deduct a full IRA contribution of up to $5,500 in 2013 as long as their joint household income does not exceed $95,000, up from $92,000 in 2012. They may claim a partial IRA deduction if their joint income is between $95,000 and $115,000 in 2013. Married workers may contribute up to $5,500 to an IRA for a nonworking spouse as long as the employer spouse earns enough income to cover both IRA contributions.

For an IRA contributor who is not covered by a workplace retirement plan but who is married to someone who is covered, the deduction is phased out if the couple's income is between $178,000 and $188,000 in 2013, up from $173,000 and $183,000 this year. Single workers and married workers where neither is covered by a workplace retirement plan can deduct their full IRA contribution, regardless of income.

The AGI phase-out range for taxpayers making contributions to a Roth IRA for 2013 is $178,000 to $188,000 for married couples filing jointly, up from $173,000 to $183,000 in 2012. For singles and heads of household, the income phase-out range is $112,000 to $127,000, up from $110,000 to $125,000.

Self-employed individuals with sufficient income can contribute up to $51,000 to a SEP IRA in 2013, up from $50,000 this year. Self-employeds age 50 or older who establish a solo-401(k) can contribute up to $56,500 in 2013 due to the catch-up provision. SEP IRAs do not allow catch-up contributions.

0
Comments

What do you think?

Get Daily News & Intel

Breaking news and in-depth coverage of essential topics delivered straight to your inbox.

X

Subscribe and SAVE over 72%

View our best offer
Subscribe to Print