Everyone continues to look toward Congress for answers on the looming fiscal cliff, wondering what will become of the expiring Bush tax cuts and curious how it will affect them personally. The Internal Revenue Service (IRS), however, has already issued guidelines for 2013 changes to contributions in workplace and individual retirement plans.
To account for cost-of-living adjustments for 2013, the Internal Revenue Service has increased the annual limit on contributions to 401(k) plans to $17,500 from $17,000. Employees age 50 and older can contribute an additional $5,500, putting total contribution for this age group at $23,000 up from $22,500 in 2012.
Annual contributions to IRAs, both traditional and Roth, will rise to $5,500 from $5,000. This is the first limit increase since 2008. Individuals age 50 and older can contribute an additional $1,000 to their IRA, putting the total allowable contribution for this age group at $6,500 for 2013, up from $6,000 for 2012.
Traditional and Roth IRA contributions are phased out based on the taxpayer’s adjusted gross income (AGI). Phase-out limits for both types of IRA have increased for 2013 and vary depending on whether you are married and whether you contribute to a workplace retirement plan. As a reminder, you can make 2012 contributions to your IRA up until you file your taxes on April 15, 2013.
Contributing to a workplace or individual retirement plan, especially with pretax dollars or under a deduction, reduces your taxable income and furthers your retirement goals. Even as the fiscal cliff debate continues, you can still affect your contributions for 2012 and 2013.
A Growing Number – The nation's projected population as we ring in the New Year is more than 315 million (Source: U.S. Census Bureau, Population Estimates).
Online Shopping – The value of retail sales by electronic shopping and mail-order houses in December 2011 was $38 Billion (Source: U.S. Census Bureau, Business and Industry).
Retired Soldiers – There were 9.2 million veterans 65 and older in 2011 (Source: 2011 American Community Survey).