Modest 401(k) and IRA Changes Coming in 2014

Workers with slightly higher incomes will qualify for retirement-savings tax deductions and credits.

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By Emily Brandon

The amount workers can contribute to 401(k)s and individual retirement accounts will stay the same in 2014. Inflation, as measured by the consumer price index, didn't increase enough to justify raising the contribution caps.

"Some pension limitations such as those governing 401(k) plans and IRAs will remain unchanged because the increase in the consumer price index didn't meet the statutory thresholds for their adjustment," according to a statement from the Internal Revenue Service.

But some of the income thresholds that allow savers to qualify for tax deductions and credits will increase next year. Here's a look at how 401(k) and IRA rules will change in 2014:

Limits for 401(k) contributions unchanged. Taxpayers may contribute up to $17,500 to their 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan in 2014, which is the same amount as in 2013. The catch-up contribution limit for employees age 50 and older is also unchanged at $5,500. In 2012, 11 percent of 401(k) participants contributed the maximum possible amount, according to a Vanguard study of 2,000 401(k) plans with 3 million participants. Some 401(k) plans also have lower plan-specific caps on contributions.

IRA contribution limits unaffected. The limit on IRA contributions will continue to be $5,500 in 2014. Individuals age 50 and older can contribute an additional $1,000, the same catch-up contribution as in 2013. Just under half (47 percent) of IRA savers contributed the maximum amount in 2011, according to an Employee Benefit Research Institute analysis of 20.5 million accounts.

Larger IRA income limits. The tax deduction for traditional IRA contributions is phased out for savers with a workplace retirement plan who have modified adjusted gross incomes between $60,000 and $70,000, up from $59,000 and $69,000 in 2013. The income phase-out range for married couples with retirement accounts at work will also climb by $1,000 to between $96,000 and $116,000.
For investors who don't have a workplace retirement plan but are married to someone who does, the tax deduction is phased out if the couple's income is between $181,000 and $191,000, which is $3,000 more than in 2013.

Higher Roth IRA income cutoffs. Workers can earn $2,000 more ($3,000 for couples) in 2014 and still be eligible to contribute to a Roth IRA. The AGI phase-out range for Roth IRAs is $114,000 to $129,000 for singles and heads of household and $181,000 to $191,000 for married couples. However, investors who earn more than these income limits may still be able to convert traditional IRA assets to a Roth. "Even if you are phased out by income from making a Roth contribution, you can contribute to a traditional IRA that is nondeductible and then convert that to a Roth," says Lara Lamb, a certified financial planner and founder of Lamb Financial Planning in Encino, Calif. "However, you need to be aware that the conversion might be taxed."

Bigger saver's credit threshold. Low- and moderate-income workers who save for retirement in 401(k)s and IRAs are eligible to claim a tax credit that can be worth as much as $1,000 for individuals and $2,000 for married couples. Couples can claim the saver's credit until their AGI exceeds $60,000, which is $1,000 more than in 2013. The income limits are $45,000 for heads of household and $30,000 for individuals, up from $44,250 and $29,500, respectively, last year. Saver's credits were claimed on 6.1 million tax returns in 2010, but most people received small benefits. The average saver's credits were $122 for individuals, $165 for heads of household and $204 for couples.

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Chloe Ryan

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December 22 2013 at 8:02 AM Report abuse rate up rate down Reply

Reverse Mortgage Loans can be the solution to retirement; it is specifically designed to help homeowners over the age of 62.

November 28 2013 at 2:48 PM Report abuse rate up rate down Reply

the way tecnology is developed is removing the worker which is the most profit eating commodity in a corporation. there may come a day when the only jobs availabe will be ones to fix the machines that took the jobs

November 13 2013 at 12:25 AM Report abuse rate up rate down Reply
1 reply to willoughbe's comment

That's why I got a degree to fix the machines

December 11 2013 at 10:44 PM Report abuse rate up rate down Reply

They are coming after your 401's. That is Republicans and Democrats. They spend all the money you saved in Social Security. Now the see the money you have saved in your 401 and they are going to spend that too.

November 12 2013 at 11:50 PM Report abuse +2 rate up rate down Reply

Good night all..

November 12 2013 at 11:41 PM Report abuse rate up rate down Reply

The Return of the Union ©
There are many that are happy that unions are going the way of the Doo-doo bird, but is this a good thing? In today's economy of decreasing American Jobs, decreasing medical and retirement benefits, decreasing wages, and higher demands for education and experience, the average soul is having a difficult time feeding his or her self and family.

Unions came into existence due to poor working conditions, low wages, low benefits, etc., that were being offered by American Businesses back nearly a hundred years ago. And yes, some unions abused their positions and caused labor and management problems for some companies. But ...

If companies insist on not paying decent wages, not paying benefits, then our Welfare and Food Stamp programs will suffer, as will the few remaining workers that are actually making enough money to pay taxes and support those that cannot.

Thus, it may be time for the workers of all non-union companies to unionize and 'fight back' against those businesses that would reduce American Workers to the status of Slaves or foreign workers that burn in factory fires, die in building collapses, work for $2.00 per day, have no health coverage, no retirement, and no voice in the running of the companies for which they slave 8 to 12 hours per day.

Return the Unions, and Fight Back, NOW !

November 12 2013 at 11:41 PM Report abuse +4 rate up rate down Reply
1 reply to mac2jr's comment

oh save it. the only entity that can afford union labor is the government, and they are going bankrupt. remember, america is the land of self reliance and that is the key to prosperity. if you want to sit on your butt and rely on your union to express your self worth, you are already on your way to join the dodo bird and the dinosaur.

November 13 2013 at 3:26 PM Report abuse -1 rate up rate down Reply
1 reply to vrosen's comment

right the CEO's of these companies make billions of dollars off of the working people making $15.00 a hour.......there better be UNIONS or people won't be making that much a hour!!!!!!! SOLIDARITY FOREVER!!!!!!!!!!!!

November 18 2013 at 9:09 PM Report abuse +1 rate up rate down
Steven LaRose

there is no 401k its a myth like ira they say its there but cant anyone find it when u need it ......

November 12 2013 at 11:39 PM Report abuse rate up rate down Reply

The Republicans want smaller government and are doing their best to keep the Federal employment under 2,000,000 workers, but every time we need something done, like fight two wars, build weapons for war, create computer programs, etc., it Contracts these jobs out to civilian private industry companies that enviably have 200 to 500% cost overruns and have to redo the work over and over. This is costing the American Taxpayer trillions of extra dollars and is contributing to the retirement problems as well.

What we need it to do away with all private contractors, hire some 500,000 extra government workers that are dedicated to doing the job right the first time at the salary and retirement being paid. This will free up taxpayer money that can be invested in rebuilding the country, solving global problems, and preventing future wars, as well as giving everyone some pocket change to invest in his or her retirement.

November 12 2013 at 11:39 PM Report abuse +1 rate up rate down Reply
1 reply to mac2jr's comment

You trust government workers to do the job right. Look what government employees have done to the ACA(which should be abandoned). They are all inept.

November 13 2013 at 12:24 AM Report abuse rate up rate down Reply

The Government should stay out of private industry people are back here today, so.......

Government Don't Create Jobs.. ©
That statement is the lie of the Century. Let's look at Government at all levels, from local community to national. At the local community level government needs police, teachers, street maintenance, managers, engineers, construction contractors, accountants, attorneys, and town planners. These are jobs, jobs for educated people that keep the towns and cities humming.

At the state level you have the same basic groups, police, managers, engineers, Port Authorities, etc., plus you have those people that build roads, bridges, reservoirs, parks, etc. These are jobs that keep the state running.

At the federal level you have the same basic groups, plus national security, air traffic control, Interstate highway and commerce, FDA, CDC, FBI, IRS, USAF, USN, USA, USM, Coast Guard, Port Authority, TSA, etc. These are jobs that keep the State and Local communities operating.

Then let's look at projects. Start with NASA, NOAA, DOT, DOE, Amtrak, and what it took to put these programs of research, development, and execution into effect; it took millions of people working on tens of millions of individual projects that were combined to produce the LEM, weather reporting systems, Interstate Highways, network of various energy supplies, and a passenger rail system larger than almost all the world's other rail systems combined.

Government has paid for the research and development of Dams, roads, bridges, airports, food supplies, medical services, railroads, sea lanes and ports, energy sources, park systems, space travel and GPS, communications, computers, plastics and coatings, materials, and tens of thousands of items you and I use each and every day.

Without Government supplying the need, and the money, for wars, protection, necessities, research, transportation, communications, and such, the U.S.A.'s business community would NOT exist as we know it.

Think about it; Government Does Create JOBS!

November 12 2013 at 11:34 PM Report abuse +1 rate up rate down Reply