With the release of the COLA for 2013, we now know the 401(k) and IRA contribution and deduction limits. The good news is that both have increased, as have the income limits on deductible and Roth IRA accounts.
401(k) Contribution Limits
As announced by the IRS, the contribution limit on 401(k) retirement accounts goes up to $17,500. This is an increase of $500 from last year, and also applies to 403(b), most 457 plans, and the federal government’s Thrift Savings Plan. The catch-up contribution limit for employees aged 50 and over remains unchanged at $5,500. Here are the 401(k) contributions over the last several years:
Tax Year | Regular Contribution Limit | Catch-up Contribution Limit for those 50 & older |
|---|---|---|
| 2013 | $17,500 | $5,500 |
| 2012 | $17,000 | $5,500 |
| 2011 | $16,500 | $5,500 |
| 2010 | $16,500 | $5,500 |
| 2009 | $16,500 | $5,500 |
| 2008 | $15,500 | $5,000 |
| 2007 | $15,500 | $5,000 |
| 2006 | $15,000 | $5,000 |
IRA Contribution and Deduction Limits
With a deductible IRA, it’s important to undertand both the contribution limits and the income limits to qualify for the deduction. For 2013, both went up.
IRA Contribution Limits
The maximum contribution in 2013 is now $5,500, an increase of $500. The catch-up contribution for those 50 and older remains at $1,000. Here are the IRA contribution limits over the last several years:
Tax Year | Regular Contribution Limit | Catch-up Contribution Limit for those 50 & older |
|---|---|---|
| 2013 | $5,500 | $1,000 |
| 2012 | $5,000 | $1,000 |
| 2011 | $5,000 | $1,000 |
| 2010 | $5,000 | $1,000 |
| 2009 | $5,000 | $1,000 |
| 2008 | $5,000 | $1,000 |
| 2007 | $4,000 | $1,000 |
| 2006 | $4,000 | $1,000 |
Deductible IRA Income Limits
Now on to the question of whether your IRA contribution is deductible. Whether your IRA contribution is deductible depends on three factors: (1) your filing status, (2) your adjusted gross income, and (3) whether you are covered by a retirement plan at work.
Below are listed the phase out ranges based on the above factors. If your AGI is less than the bottom of the applicable range, your IRA contribution is fully deductible. If your AGI falls within the range, your contribution is partially deductible. And if your AGI is above the range, then your contribution is not deductible.
If you are covered by a retirement plan at work, your phase out range is as follows:
Singles and heads of household: $59,000 and $69,000
Married couples filing jointly: $95,000 to $115,000
Married couples filing separately: $0 to $10,000
If you and your spouse are not covered by a plan at work, then you can take the full deduction up to the amount of your contribution limit.
Roth IRA Contribution and Qualification Limits
The contribution limits for a Roth IRA are the same for a traditional IRA. The key question is whether your income disqualifies you from opening up a Roth IRA. For 2013, the income limits have gone up. Here are the details:
Singles and heads of household: $112,000 to $127,000
Married couples filing jointly: $178,000 to $188,000
Married couples filing separately: $0 to $10,000
To open an IRA, check out this list of the best brokers for traditional and ROTH IRAs.
Rob Berger
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Published or updated November 1, 2012.
{ 9 comments… read them below or add one }
Just a note that if you are disqualified from contributing to a Roth IRA because of income limits, you can always open a non-deductible Traditional IRA and convert it immediately to a Roth.
I’ve been doing it for the past 3 years because of income limitations and plan to do it again in 2013. Keeping my fingers crossed that lawmakers don’t close the loophole, or get some sense in their heads and just lift the income limits.
Just a note that if you are disqualified from contributing to a Roth IRA because of income limits, you can always open a non-deductible Traditional IRA and convert it immediately to a Roth.
I’ve been doing it for the past 3 years because of income limitations and plan to do it again in 2013. Keeping my fingers crossed that lawmakers don’t close the loophole, or get some sense in their heads and just lift the income limits.
I am aware there are limits for both 401(k) and IRA plans. I am a federeal government employee and have the Thrift Savings Plan. I am thinking about opening an IRA to contribute more money towards retirement. IRA’s are more flexible in what you want to contribute to as compared to 401(k)’s and my dreaded TSP. The only reason I am even keeping my TSP is because my employer matches up to 5%. I figure free money is free money.
My question is what is the limit on contributions if you have both accounts? I read somewhere that you have to consider both or you will be penalized for over contributing.
I am an employee of the federal government and have a Thrift Savings Plan. I have been thinking about additionally opening an IRA because of the flexibility of what you can invest in. 401(k)’s are limited and the TSP is even worse. The only reason I am sticking with it is because my employer matches up to 5%.
I would like to know what the contribution limitations are when you have one of each. My guess is that you cannot do the full contribution for both.
Bianca,
The limit for the TSP is the same as a 401k ($17,000 this year, $17,500 for 2013) and the limit for an IRA is $5,000 this year, and $5,500 in 2013. The amounts are independent of each other.
If I were you, I would contribute more to the TSP. The funds are managed by Blackrock – they have great returns and low fees. Low fees are surprising for funds run by Blackrock, but they must have some kind of deal in place for the government. Makes me wish I were still in the Army.
If you refer to your 401k Contribution table, you indicate in years 2009 through 2011 that the Catch-Up Contribution limit was $5,500. Is this correct?
Yes, I believe it is.
So then, it dropped back down to $5,000 in 2012? (referencing the 401k table in this article)
Jim, you are absolutely correct. Good catch. I’ve updated the table.