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Retirement Changes for 401k Plans & IRA’s


In the U.S. News & World Report article “401(k) and IRA Changes Coming in 2013,” Emily Brandon tells us that there are some changes coming to your retirement plans soon.  First of all, you will be able to defer taxes on $500 more that you are currently in your 401k and IRA plans.  There will be higher contribution limits in both 401k and IRA plans, though the changes for each type of plan are a little different.  Contribution limits are increasing from $17,000 to $17,500 for 401k’s, 403b’s, and Thrift Savings Plans.  Employees who are 50 and above who are trying to catch-up with their retirement savings will still have a limit of $5,500 for their 401k catch-up.  Some advisors recommend adding to your 401k savings each time you get a raise, so that you are increasing savings and not trying to play catch-up.

For IRA’s, employees who meet their income requirements will be able to contribute $5,500 instead of $5,000 next year.  The IRA catch-up contribution limit also remains unchanged at $1,000.  This increased limit gives either the benefit of increasing your tax deductions or increasing your tax-free investments, depending on what money you use for your IRA.  The income limits for IRA deductions will be increasing in 2013.  Workers who have a retirement plan at work and contribute to a traditional IRA will have their deduction phased out if their adjusted gross income is between $59,000 and $69,000.  Other income limits have increased as well based on the increased cost of living index.  Check with your plan administrator to see if your income limit has increased and by how much.

401k plan participants will see their fees disclosed much more prominently on their 2013 statements.  Regulations put in place this year by the Labor Department call for fee disclosure along with account returns compared to a benchmark return to be on quarterly and annual 401k statements.  This gives you an easier way to see if you are happy with the funds in which you are invested.  Another recent proposition by the government was to put 401k annuity information on annual statements as well.  Employees can see how much their monthly annuity payment would be should they rollover their 401k into an annuity at retirement.

The limits on Roth IRA’s are also increasing.  The contribution limit for single people and heads of household has gone up to a range of $112,000 to $127,000, an increase of $2,000.  The income limit for couples went up $5,000 to a range of $178,000 to $188,000.  Those who earn more than the Roth IRA contribution limits are able to convert some of their traditional IRA’s into a Roth IRA to increase their tax-free investments.  Finally, the income limit to receive a saver’s tax credit has increased as well.  Couples can earn the retirement saver’s credit if they earn under $59,000, an increase of $1,500 from 2012.  The single person’s income increase will be $750 and the head of household increase will be $1,125.  If you have questions about any of these retirement savings changes occurring in 2013, make sure to speak with your advisor or contact the federal government or IRS.

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