The new year brings with it our resolutions for everything from weight loss to finding a new job. Along with 2013 comes changes to your 401(k) and IRA. With these new changes, make the resolution to add that extra bit to your retirement plans.
Here’s a sneak peek at next years retirement account changes.
401(k) Changes in 2013
1. Larger 401(k) contribution limit. This also includes 403(b) and federal government Thrift Savings Plan. The limit will increase to $17,500, and if you are over 50 you will be able to stash an additional $5,500 in 2013. Consider increasing your 401(k) deferral percentage by 1% every six months. That way you can get a gradual increase and you’ll hardly notice the extra coming out of your paycheck.
2. New 401(k) fee disclosure. Next year is the first full year that participants will receive those much talked about quarterly and annual 401(k) statements disclosing fees charged to their account. These changes came straight from the Department of Labor. Hopefully, it will shed a little light on what you are paying and what you are getting for your money.
IRA Changes in 2013
1. Higher IRA contribution limits. The contribution limit will now increase from $5,000 to $5,500 in 2013. If you are over 50, you’ll still get an additional $1,000 catch up contribution.
2. Increased IRA income limits. If you have a retirement plan at work, and you are single or file head of household, you can make an IRA contribution as long as your income is between $59,000 and $69,000 in 2013. That’s only a whopping $1,000 from 2012. Couples in which one spouse has a retirement plan and contributes to an IRA, the income phase out is $95,000 and $115,000 in 2013. Up a respectable $3,000 from 2012. If you don’t have access to a workplace plan, but married to someone who does, then the phase out range has increased over $5,000 to between $178,000 and $188,000.
3. Roth limits increase. Single and heads of household can earn between $112,000 to $127,000 in 2013. For couples, the modified adjusted gross income phase out $178,000 to $188,000 up $5,000 from 2012. Why contribute to a Roth? Tax free withdrawals.
Higher saver’s credit income limits. Couples can earn up to $1,500 more next year and still claim the saver’s credit, a tax credit for retirement savers worth up to $1,000 for individuals and $2,000 for couples. For couples is $59,000 in 2013, up from $57,500 in 2012. For singles, the limit will jump from $28,750 in 2012 to $29,500 in 2013. And heads of household can claim the credit until they earn $44,250, $1,125 more than in 2012.
So make that New Years resolution soon. Promise yourself you will increase your savings toward retirement and do it in 2013. If you would like any help with your investments, feel free to write me at firstname.lastname@example.org, or call me at (859) 225-2596.