KJ: The IRS has announced the limits for 2014 for what you can save to your 401(k) and IRA for the next tax year, and with the start of the year quickly approaching, now is the time you should take a look at what you are able to set aside. Gather your spreadsheet or good old pen and paper and start planning. You will be in a much better position this time next year if you start the planning process now, so don’t delay!
What’s the same?
The contribution limits are the same for 401(k)/403(b) plans and IRAs for 2014 as they are for 2013. So, you can potentially contribute up to:
- $17,500 for a 401(k)/403(b) employer retirement plan with catch-up provisions of $5,500 for those ages 50 and older, and
$5,500 for an IRA (traditional or Roth) with catch-up provisions of $1,000 more for those ages 50 and older.
So, what has changed?
Not a whole lot, really. The main thing that has changed, however, are the income limits that would allow you to contribute to IRAs. The Roth limits have increased slightly to:
- $114,000 – $129,000 phase-out for single filers, or
$181,000 – $191,000 for married individuals filing jointly
And, the income limits to contribute to a traditional (deductible) IRA are (for those who also have access to a retirement plan at work):
- $60,000 – $70,000 for single individuals, or
$96,000 – $116,000 for married filers
Break it into smaller chunks
While the contribution amounts for an IRA and 401(k)/403(b)/TSP are a large chunk of change, here’s what the contributions look like when you break it up throughout the year:
About $1,458 per month for the 401(k) limits, or
$729 per paycheck for semi-monthly payments (or $673 for biweekly paychecks – biweekly or semi-monthly…what’s the difference?)
About $458 per month to reach the IRA limits, or
$229 per paycheck for semi-monthly payments (or $211 for biweekly paychecks)
Even if contributing the max isn’t realistic for you and your family, start with just $100 per month and build from there as you’re able to. Saving money is one of those habits that’s easier and easier to build on over time, and the sooner the better!
One lump-sum payment versus regular, contributions
With a 401(K), you’re not really able to just do one lump sum contribution at the end of the year, but you are able to do this for an IRA. I am a fan of setting up regular contributions to an account throughout the year to help keep you in check and stay on track, but for those of you who are close to the income limits or would just prefer the flexibility and ease of tracking, you can just send your savings to a savings account and just transfer your yearly contribution to the IRA later in one swoop.
- What will you be contributing to your retirement accounts next year?
Does your budget need to shift to maximize your contributions?
Share with us what you do to make sure you save!
IRA and 401(k) limits announced: what will you be saving next year? is copyrighted by TheSimpleMoneyBlog.com without consent to republish.
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