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Retirement Contribution Limits For 2013

George Sterling | Thursday, January 17th, 2013

The Internal Revenue Service announced new Retirement Contribution Limits for 2013 on October 18, 2013. The new limits were announced in order to give relief to the public due to inflation. Here is a list of new limits set for retirement accounts for 2013:

Roth and Traditional IRA Contribution Limits:

Roth and Traditional IRAs are quite similar in nature with very minor differences but depending on your taxation bracket, these differences can change your benefits significantly. In Traditional IRA, your withdrawals after retirement are tax deductible whereas in Roth IRA, tax is deducted only when the contribution is made and the withdrawals are absolutely free of tax deduction. For both of these IRAs, contribution limits have been increased.

  • The maximum contribution for Roth and Traditional IRA is now $5,500 from $5,000.
  • The catch up contribution maximum remains the same for people aged 50 and over, staying at $1,000.

403(b), 401(k):

These plans are most commonly used in tax exempt entities under the 501c3 Internal Revenue Code. It is being commonly used in colleges, public schools, churches and universities. The Internal Revenue Service also adjusted the contribution limits for these plans as follows:

  • The catch up contribution maximum for individuals aged 50 or above remains the same at $5,500.
  • The elective deferral maximum however has been increased to $17,500 from $17,000.
  • The annual contribution has also been increased to $255,000 from $250,000.
  • The defined contribution maximum has also been increased to $51,000 to 50,000.

 

SIMPLE IRA:

  • The SIMPLE IRA was designed for small businesses that have less than 100 employees. It allows them to contribute easily and efficiently. The new contribution limits set by IRS are as follows:
  • Employee deferral limit has been increased by $500 and now stands at $12,000.
  • The catch up contribution for individuals aged 50 and above has not been changed and stays at $2,500.

SEP IRA Contribution Limits:

  • The SEP IRA plan was made for business owners who provide retirement plans to their employees. IRS has also introduced new changes into SEP IRA which is as follows:
  • The contributions made by an employer towards the SEP IRA of an employee has been increased to $51,000 in 2013 from $50,000 in 2012. But this amount cannot exceed 25% of the total compensation guaranteed to the employee.
  • Employee’s compensation that is considered by an employer can now be up to $255,000. This is an increase from previously set $250,000.

More changes made by the IRS will affect some taxpayers in one way or the other. For example, if an individual has earnings above a particular limit, then he/she may not be able to deduct contributions made towards a Traditional IRA.

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