IRS Gives Your Retirement Saving a Little Boost for 2013

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IRSSaving for retirement has always been hard. But starting in 2013, the IRS is making it a little easier for you to put more money aside for your golden years.

On Oct. 18, the IRS announced that the contribution limits for the most commonly used retirement accounts -- IRAs and 401(k) plans -- would be going up. For 2012, you can put as much as $5,000 into an IRA and up to $17,000 in a 401(k) account. In 2013 those amounts increase $500 for both types of accounts. The additional amounts that those age 50 or older are allowed to put in will remain the same – an extra $1,000 for IRAs and $5,500 for 401(k)s.

The reason for the changes? Inflation. Inflation adjustments are designed to let your retirement savings keep pace with rising costs of living.

The IRS determines contribution limits using a factor that takes changes in the Consumer Price Index into account. Since inflation has been generally subdued in recent years, this is the first contribution limit boost for IRAs since 2008, when the new rules for determining limits took effect. For 401(k)s, this will mark the second straight annual increase: Limits were stuck at $16,500 from 2009 to 2011 before they rise by $500 this year.

An extra $500 may not sound like much, but having the flexibility to boost your retirement savings could result in your having a lot more than $500 extra by the time you retire.

More Flexibility

In addition to contribution limits, some other changes could affect some taxpayers.

For instance, if your earnings are above a certain amount, then you may not be able to deduct contributions you make to a traditional IRA if you or your spouse has coverage in a retirement plan at work. Other limits govern whether you can contribute to a Roth IRA at all or are eligible for a retirement savings contribution credit of up to $2,000. Overall, the figures reflect adjustments of about 2.5%.

Where there's more uncertainty, though, is with next year's tax brackets. Ordinarily, we'd have a good idea of what those brackets would look like by now. But with the fiscal cliff looming, planning your taxes for 2013 and beyond has become a more daunting task.


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gainder2

Excuse me but who gave the IRS the authority to do anything but enforce our tax laws?
Is it wise to have the IRS assume the role of policy maker? Law maker? Doesn't this make the IRS the judge, jury, and executioner all at once? Who gave the IRS such authority? I don't recall EVER VOTING for anyone in the IRS. I don;t recall the freedom of choice between cadidates for the IRS.
Sorry to stretch the point but hopefully even those taking flight lessons understand there are alot of americans who are tired of an absolute lack of accountability by agencies/and quasi-government entities such as the IRS exerting any authority what-so-ever when it comes to policy and law.
Since the IRS has AUTHORITY to set law, maybe the IRS should simplify our tax laws and clean up the living, breathing, tax disaster our Dumb-______( fill in the blank), government has built for us.
Funny how equality is no where to be found in our tax laws. Apparently we are not all equal, at least not in the eyes of our own government and its henchman group of incompetents, the IRS.
Sorry to ramble but its important for the IRS to keep hearing how unhappy we average americans are on the subject.

October 23 2012 at 12:43 AM Report abuse rate up rate down Reply
edfarhood

Two years ago, we gave the facts about a mythical 3.8 percent “sales tax” on homes, explaining that the vast majority of those who sell their homes won’t pay a dime. The tax will fall only on net investment income of a high-income few. Even for them, it’s not a “sales tax” on every dollar of the selling price of a home, but a tax on the profit. Furthermore, for a principal residence, only the amount of profit that exceeds $250,000 (or $500,000 in the case of a couple) will be taxed.

October 23 2012 at 12:09 AM Report abuse rate up rate down Reply
Don E

After reading the comment regarding the home sales tax, I now know why they say a little education is a very dangerous thing!

October 22 2012 at 10:31 PM Report abuse rate up rate down Reply
1 reply to Don E's comment
cyrosie

Don: Please research the OBAMACARE. There is a provision for a "sales tax" when you sell your home.

October 22 2012 at 11:32 PM Report abuse rate up rate down Reply
weeziebathome

What inflation? Many people will see a very little increase in their social security check because there is so little inflation. How is it the government can have it both ways?

October 22 2012 at 8:50 PM Report abuse rate up rate down Reply
1 reply to weeziebathome's comment
pdbocc

1.7% is the cost of living increase for 2013. The $17,000 limit should increase by $289 to a total of $17,289, don't know why they rounded it up to $17,500, But really it's not worth getting all riled up about. How many people do you know who can put $336 per week,( $17,500 divided by 52), into their 401K ?

October 22 2012 at 9:52 PM Report abuse rate up rate down Reply
1 reply to pdbocc's comment
cyrosie

So please explain again, why the government is using multiple CPI?. One for retirees and another for something else. How many CPIs are there. Depends on what you are trying to prove. 1.7% is due to CPII. Which CPI is the IRS using to increase the IRA and the 401(K).

October 22 2012 at 11:31 PM Report abuse rate up rate down
gmydogbud

Heard that Retirees saving and investments are set to be Taxed at a Higher Rate in 2013. Nice, Very Nice!! They okay a COLA of CRUMBS - 1.7% for American Senior Citizens. Due To OBAMA CARE, & The SEVEN HUNDRED MILLION, He HAS TAKEN OUT TO HELP PAY FOR - OBAMA CARE! Medicare Payments are going up to over ONE HUNDRED DOLLARS in 2013 & OVER TWO HUNDRED DOLLLARS PER MONTH IN 2014!! This Administration Has Hundreds OF Billions For Countries & People Who Want Us DEAD - ILLEGAL ALIENS & THEIR ANCHOR BABIES - BUT - AMERICAN SENIOR CITIZENS - WHO HAD A S.S. FUND - That Per President L.B.J. - COULD NEVER BE DEPLETED. HAS BEEN LEFT FULL OF I.O.U.'s - DUE TO BOTH DEMOCRAT & REPUBLICAN POLITICANS OVER THE YEARS! You'll Note That The Politicans Are Doing Very Well For Themselves. They & Their Famlies Are Living Very Well - Where Pray Tell Is That Shared Sacrifice They Are Always Talking About? When Might We Expect To See Their Sacrifice? Do As I Say - Not Do As I Do - Is What They Say!!!

October 22 2012 at 7:14 PM Report abuse rate up rate down Reply
jthimm

After rewarding the banking system, unions and their pension funds, the working class get a few crumbs the fall from the table. Such gerneroisty is overwhelming.

October 22 2012 at 7:00 PM Report abuse +3 rate up rate down Reply
rjen164497

Taxes and low interest rates are killing seniors. First Obamacare wants to let seniors die early and now they want to kill the way seniors live in their last few years.

October 22 2012 at 6:56 PM Report abuse -3 rate up rate down Reply
jack

WOW, I am getting a raise in my Social Security monthly amount..
I'll take my wife out to Dinner...
At The Golden Arches...
and order off the $1 menu
might have enough left for dessert...
Thank you Me Prez...

October 22 2012 at 5:50 PM Report abuse +7 rate up rate down Reply
masmanz

401K -- Save money from IRS and loose it in the stock market. This is a government's welfare plan for the fund managers.

October 22 2012 at 5:40 PM Report abuse +3 rate up rate down Reply
ectullis

IRS Gives Your Retirement Saving a Little Boost for 2013. What retirement savings?

October 22 2012 at 5:20 PM Report abuse +6 rate up rate down Reply