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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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
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

One word UNION..get onboard..unions were formed for a for thought..

November 12 2013 at 10:21 PM Report abuse +6 rate up rate down Reply
1 reply to leelohr's comment
Tobby S.

UNIONS have been the destruction of this Country...

November 12 2013 at 11:20 PM Report abuse -1 rate up rate down Reply
1 reply to Tobby S.'s comment

there the only reason theres a minimum'd be a third world country without them......that's right we are at a minimum wage of $8.00 a hour........keep feeding the corporate GREED!!!!!!!!!!!!

November 18 2013 at 9:37 PM Report abuse rate up rate down

Joan, you are so wise, thank you, all shut eye ain't sleep, wake up sheeple

November 12 2013 at 9:08 PM Report abuse +2 rate up rate down Reply
Barb Smith

You are much better off in a union job any union , You get health insurance good wages and pension. When You are done You get paid like the teachers cops firemen congress senate president You don't see Them hating unions do You cause They get a lot of money

November 12 2013 at 9:05 PM Report abuse +4 rate up rate down Reply
1 reply to Barb Smith's comment

I was a teacher and we didn\'t have a union. We had an association. I taught for 30 years and the \"union\" (association) never did much for any teacher. They just take your dues and campaign for any democrat. My last 15 years of teacing I didn\'t join the association as I saw no benefit from joining.

November 13 2013 at 12:30 AM Report abuse rate up rate down Reply

cops get a pension after20 years, what about all the dirty money they squirrel away during their beat time, is that taxed, arethere any Serpico's left, or just dirty cops

November 12 2013 at 9:04 PM Report abuse +2 rate up rate down Reply
1 reply to oxytocin92115's comment

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November 12 2013 at 10:02 PM Report abuse +3 rate up rate down Reply