2013 Tax Law Changes Affecting Your 401(k) And IRA
The thought ofstrikes terror in the hearts of many Americans.
For most of us, times are tough enough as it is. The last thing anyone wants is for the things they buy on a regular— milk, gas, bread, toothpaste, whatever — to get more expensive.
But that’s what seems to be happening. The latest numbers from the Bureau of Labor Statistics’ monthly Consumer Price– for January 2013 — show that the “all items ” increased by 1.6% in the past year before seasonal adjustment.
What does this Inflation is coming. But the Internal Service has taken .?
But in this particular case, there’s need to fear.
Let me explain…
Responding to the recent inflation realities, thehas altered its rules on retirement account contributions. Now you can take steps toward beating inflation by contributing more to your tax-advantaged retirement plan in 2013, and the income limits on deductions for contributions have been raised as well.
If you want to learn the best ways to maximize your savings by taking advantage of new tax laws, read on for some of the changes coming to your retirement plan in 2013:
1. You Can Contribute More To Your 401(k)
The annual contribution limit for a 401(k) plan has been raised from $17,000 in 2012 to $17,500 in 2013. This limit doesn’t apply only to the 401(k). If you contribute to a 403(b), 457 or Thrift Savings Plan, you can contribute more this year.
It’s important tothat the “catch up” contribution amount for those 50 and older remains at $5,500.
If your employer offers to match a percentage of your 401(k) contributions, take advantage of it because it amounts to freefor your retirement. The total that you can contribute to a 401(k) including your employer’s match is $51,000.
Maxing out your account contributions tax liability through a . If you want to max out your contributions, you need to set aside about $1,458 a month. At that rate, with a 6% annual return, you could grow your nest egg to $244,503.75 in 10 years.help you prepare for the future, and it also can help you reduce your
It’s also worth noting that 2013 marks the beginning of more transparent quarterly 401(k) statements. You’ll see how much you are paying in fees and decide whether or not your employer’s plan is the best value.
2. You Can Add More To Your Traditional
For the first time in several years, the IRA. This year, the amount you can contribute increases by $500 to $5,500. The catch-up contribution for IRAs remains $1,000 for those 50 and older.decided to increase the amount you can contribute to an
With a traditional IRA, you can take a tax deduction for your contributions up to a certain point. If you have a retirement plan through your employer, your tax deduction begins to phase out with a modified adjusted gross income (MAGI) of $59,000 for singles and heads of households. It’s completely phased out at $69,000.
For married couples who contribute to an IRA through an employer, the range is $95,000 to $115,000. For those who don’t have access to a plan through their job, it’s phased out between $178,000 and $188,000.
3. Income Limit Restrictions Have Been Loosened For Roth IRAs
According to the new rules for Roth IRAs, you can make a little morein 2013 and still be eligible to contribute. The MAGI phase-out range for eligible single filers and heads of household jumped by $2,000 from $110,000-$125,000 to $112,000-$127,000.
For those who are married and filing their taxes jointly, the phase-out begins at $178,000 and cuts off at $188,000 — up from $173,000-$183,000 last year.
Remember that your Roth IRA contributions aren’t tax ; instead, the benefit comes from paying taxes up front, then being able to withdraw later from your Roth without paying taxes.
4. Increased Saver’sIncome Limit
For those with low to moderate incomes, the saver’s tax credit as an incentive for responsible retirement planning. For 2013, the saver’s hinges on an increased income limit.provides a way to earn a
Married couples can earn up to $1,500 more ($59,000 in 2013, up from $57,500) and still be eligible to claim the saver’s. The income limit for individuals has increased to $29,500 (up from $28,750), and heads of household can claim the if they make up to $44,250 (up from $43,125).
Couples can get a tax qualified retirement plan.of of up to $2,000, while singles can take a of up to $1,000 if they contribute to a
TheAnswer: As you complete your planning for 2013 (that is, the taxes you’ll file by April 2014), keep these changes in mind. You have the chance to improve your nest egg and the power of interest to work on your behalf.
Make sure to consider sources of free, including your employer match and the saver’s . And, at the very least, do what you can to reduce your with the help of tax deductions for your contributions.
The government wants to reward you for saving for retirement; take advantage of these opportunities.
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–Miranda MarquitSource: InvestingAnswers
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