Good news: the federal limits on IRA and 401k contributions are increasing.
Starting in 2013, eligible people under age 50 can contribute $17,500 to 401k plans and $5,500 to IRA plans. That’s a $500 increase for both the 401k and IRA contribution limits.
Eligibility limits for IRA contributions and the saver’s tax credit have also increased. Below is the full story on how much you can contribute to your retirement accounts.
401k Contribution Limits – Workers can now contribute $17,500 to 401k, 403b and Thrift Savings Plans. (The 403b is analogous to the 401k retirement plan, but for educators. The Thrift Savings Plan is for federal employees.)
The catch-up contribution limit remains unchanged. People who are 50 or older can contribute an additional $5,500, for a total of $23,000.
(Read More: 4 Retirement Tips for People 40 and Older)
IRA Contribution Limits – Individual Retirement Account contribution limits are now $5,500 per year across a combination of Traditional and Roth accounts. The catch-up contribution limit remains unchanged at an extra $1,000 per year for eligible participants 50 and older.
(Read More: How Much Do I Need for Retirement?)
Roth IRA Eligibility Limits – Previously, single people and heads of households could only contribute to a Roth IRA if they earned up to $125,000, with the tax benefit phasing out once their income surpassed $110,000. Couples could only contribute if their income was below $183,000, with their tax benefit phasing out once their income surpassed $173,000.
Those limits are now raised. Singles and household heads can earn up to $127,000, and the phase-out doesn’t begin until their income surpasses $112,000. Couples can earn up to $188,000 and retain their eligibility, with the tax benefits phasing out once they earn more than $178,000.
Traditional IRA Tax Deduction Limits – Previously, single and head of household workers who had an employer retirement plan and also made traditional IRA contributions saw their tax deductions phase out if they had a modified adjusted gross income between $58,000 and $68,000. That range is now adjusted up to $59,000 to $69,000.
For married couples in which the spouse with the workplace plan is the same person making the contribution, the phase-out is $95,000 to $115,000, an increase over the previous phase-out of $92,000 to $112,000.
For couples in which the spouse who is not covered by a workplace plan is making the contribution, the phase-out range is $178,000 to $188,000, an increase over the prior phase-out range of $173,000 to $183,000.
Saver’s Income Credit Limits – Single people earning up to $29,500 can claim the retirement saver’s tax credit. That’s an increase over the prior income limit of $28,750. Heads of households are eligible for the retirement saver’s tax credit if they earn $44,250, a jump over the prior income limit of $43,125. And couples filing jointly can claim the retirement saver’s tax credit if they earn up to a combined $59,000, an increase over the previous limit of $57,500.