Next year will bring subtle changes to 401(k) and IRA rules, with the changes mostly happening for IRAs. There will be one shared change for both retirement plans that introduces a bigger saver’s credit threshold which should please many more people.
The contribution amount workers can put towards their IRAs will stay the same, at $5,500 in 2014, with individuals ages 50 and up being able to contribute the same catch-up contribution range as last year, up to an additional $1,100.
IRA income limits will change in the following ways:
- Those who have a workplace retirement plan with modified adjusted gross incomes of $60,000 to $70,000 will not be eligible to file for a tax deduction, up from last year’s range of $59,000 to $69,000.
- Married couples with workplace retirement plans making between $96,000 to $116,000 per household will not be able to file for the tax deduction either, also up $1,000 from last year.
- Investors without a workplace retirement who are married to a spouse that has one, if their shared income is between $181,000 and $191,000, they will not be eligible for the tax deduction, up $3,000 from 2013.
- Roth IRA income cutoffs will be larger, as workers can now earn an additional $2,000 more, with couples being able to earn an additional $3,000 and still qualify to contribute to a Roth IRA.
- Individuals with an adjusted gross income of $114,000 to $129,000 will not qualify for a Roth IRA, nor will married couples making between $181,000 to $191,000.
Like the IRA contribution limits, 401(k) contributions will remain the same, with the maximum being $17,500. This extends to taxpayers contributing to their 401(k), 403(b) and most 457 plan, as well as the federal government’s Thrift Savings Plan. Employees 50 and older will be able to contribute an additional $5,500, the same as last year.
Great news for low and moderate income workers saving in 401(k)s and IRAs, who can claim a tax credit that could be up to $1,000 for individuals, and $2,000 for married couples. Couples will be eligible to claim the saver’s credit up until their adjusted gross income exceeds $60,000 (up $1,000 from 2013), heads of household can claim the credit until theirs AGI exceeds $45,000, and individuals can claim it until they reach $30,000.
Find the best bank account for you now.
See how much you can save in just a few steps.