On October 18, the Internal Revenue Service announced the 401k and IRA contribution limits for 2013.  Here are the highlights from the release:

401k Contribution Limits 

  • The 2013 401k contribution limits increased from $17,000 to $17,500.  This number is the limit of how much you can personally contribute to your 401(k) each year on a pre-tax basis for federal income taxes.  This figure does not include your employer match.  This is also the contribution limit for most 403(b) and 457 plans, which are essentially the same as 401k plans.
  • Catch-up contributions for those 50 and over will stay the same at $5,500

IRA Contribution Limits

  • IRA contribution limits (for both Traditional and Roth) will increase to $5,500.  In the case of a traditional IRA, this is the amount that you can  set aside in your IRA on a pre-tax basis (provided your income does not exceed certain thresholds).  In the case of a Roth IRA, this is the amount that you can contribute to your Roth and not pay income taxes in retirement.
  • IRA Catch-up contributions for those 50 and over will stay the same at $1,000.

Traditional IRA Income Limits

  • Filing Status – Single or Head of Household.  Your eligibilty to deduct your contributions varies with your income.  You are eligible to fully deduct your contributions  to a Traditional IRA if your MAGI (modified adjusted gross income) is less than $59,000.  You are no longer eligible to deduct your contributions once your MAGI is equal to $69,000.  These thresholds increased $1,000 vs. 2012.
  • Married Filing Jointly and Covered by Workplace Retirement Plan (401k, eg): You are eligible to fully contribute to a Traditional IRA if your MAGI doesn’t exceed $95,000.  Once your income reaches $115,000 your contributions to a Traditional IRA are not deductible.   These thresholds increased by $3,000 vs. 2012.
  • Married Filing Jointly and Not Covered by Workplace Retirement Plan like a 401k : You are eligible to fully deduct your contributions to a Traditional IRA if your MAGI doesn’t exceed $178,000.  Once your income reaches $188,000 you are no longer eligible to deduct your contributions to a Traditional IRA.   These thresholds increased by $3,000 vs. 2012.

Roth IRA Income Limits

After a certain income level your ability to contribute to a Roth IRA phases out.  In 2013, the thresholds for when this begins is:

  • Married Filing Jointly: $178,000 – $188,000  (up from $173,000 to $183,000)
  • Single/Head of Household: $112,000 – $127,000 (up from $110,000 to $125,000)
  • Married Filing Separately and Covered by Retirement Plan at Work (401k, eg): $0 – $10,000

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This table describes the 401(k) contribution limits in as simple of terms as possible.

2012

2013

2014

2015

2016

IF YOU'RE UNDER 50
401(k) Contribution Limits (Elective Deferrals)$17,000$17,500$17,500$18,000$18,000
Total Contribution Limits (The maximum that can be contributed to your 401(k) in one year including employer contributions, matching etc)
$50,000$51,000$52,000$53,000$53,000
IF YOU'RE 50+
401k Contribution Limits (Elective Deferrals)$17,000$17,500$17,500$18,000$18,000
Catch up contribution
(if over 50)
$5,500$5,500$5,500$6,000$6,000
Total 401k Contribution Limit (if over 50)$22,500$23,000$23,000$24,000$24,000
Total Contribution Limit
(The maximum that can be contributed to your 401(k) in one year including employer contributions and catch-up contributions)
$55,000$56,500$57,500$59,000$59,000
OTHER LIMITS:
Employee Compensation Limit (Maximum income that can be used for determining matching contributions)$250,000$255,000$260,000$265,000$265,000
Highly Compensated Employee Threshold (For plan discrimination testing)$115,000$115,000$115,000$120,000$120,000

Source: IRS 401(k) Resource Guide; IRS Cola Tables

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