As you begin wrapping up your 2013 tax year and begin planning for 2014, you should take note of the announcements the IRS recently made for 2014 retirement plan contribution limitations. Depending on what happens with your overall salary and bonuses for 2014, you may need to adjust your percentage contribution within your paycheck so you don’t overfund your plan. Or, if you have freed up cash flow in 2014, you may be able to increase your overall contributions. Here are the important numbers to know for the Sunday paper edition of Your Smart Money Moves. (source: www.irs.gov)
- 401(k) – There was no cost of living adjustment this year. If you are under the age of 50, your maximum allowable employee deferral will be $17,500. Those who are 50 years of age or older will be able to put away an additional ‘catch-up’ contribution of $5,500 in 2014. If you have a solo/individual 401(k), you can put away up to $52,000 with employer matching contributions if you are under 50 and up to $57,500 for those 50 years or older.
- SIMPLE IRA- There was no cost of living adjustment this year. If you are under the age of 50, your maximum allowable employee deferral will be $12,000. Those who are 50 years of age or older will be able to put away an additional ‘catch-up’ contribution of $2,500 in 2014. Remember, your simple plan may have a mandatory employer contribution or a matching contribution depending on how your employer set up the SIMPLE IRA plan.
- IRA’s- The limit on annual contributions to an individual retirement arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals age fifty and over is not subject to an annual cost-of-living adjustment and remains $1,000.The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $60,000 and $70,000, up from $59,000 and $69,000 in 2013. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $96,000 to $116,000, up from $95,000 to $115,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $181,000 and $191,000, up from $178,000 and $188,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
- Roth IRA’s- The AGI phase-out range for taxpayers making contributions to a Roth IRA is $181,000 to $191,000 for married couples filing jointly, up from $178,000 to $188,000 in 2013. For singles and heads of household, the income phase-out range is $114,000 to $129,000, up from $112,000 to $127,000. For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
- Pension Plans- If you are over the age of 45 and own a business, you might want to look into setting up a defined benefit plan (pension plan) for your business. The limitations actually went up in this category, but these types of plans tend to be more complicated than defined contribution plans like the 401(k).
I’ll have another Sunday paper in December to discuss all of the write off deductions and the applicable limits in 2014. This December is a great time of year to be planning around these limits and deciding what you will do with your cash flow in 2014!
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