On October 18, 2012 the Internal Revenue Service announced several inflation adjustments for 2013 including ones for retirement plans.
401(k), 403(b), Profit-Sharing Plans:
These plans are used at public schools, colleges, universities, churches and other tax-exempt entities under the 501(c)(3) Internal Revenue Code. Effective changes to this type of plan include:
- The elective deferral (contribution) maximum is increased to $17,500 in 2013 from $17,000 in 2012.
- The catch-up contribution maximum for people aged 50 and over remains unchanged at $5,500.
- The defined contribution maximum is increased to $51,000 from $50,000 in 2012.
- The annual compensation limit is increased from $250,000 to $255,000.
Traditional IRA & Roth IRA Contribution Limits
These individual retirement plans continue to offer two different options to retirement accounts. IRA contributions are income tax deductible, whereas a Roth IRA contribution is not income tax deductible, but a withdraw from a Roth IRA fund is tax deductable. For each type of retirement fund:
- The maximum contribution is increased from $5,000 in 2012 to $5,500 in 2013.
- The catch-up contribution maximum for people aged 50 and over remains unchanged at $1,000.
SEP IRA Plan Employer Contribution Limits
Such Retirement plans help business owners provide retirement benefits to their employees. Changed regulations concerning the amount that an employer may input into an employee's account is as follows:
- The annual contribution an employer can make to an employee's SEP IRA is increased from $50,000 in 2012 to $51,000 in 2013 but still cannot exceed 25% of total compensation.
- Up to $255,000 of an employee's compensation may be considered. This is up from $250,000.
SIMPLE IRA Contribution Limits
This type of IRA plans allows business owners who employ less than 100 employees to contribute to IRAs more efficiently.
- Employee deferral limit is increased $500 over 2012 to $12,000 for 2013
- The catch-up contribution limit for people aged 50 and over remains unchanged at $2,500.
Additionally, other changes will affect some taxpayers. For example, if your earnings are above a certain amount, then you may not be able to deduct contributions you make to a traditional IRA if you or your spouse has coverage in a retirement plan at work. Other limits govern whether you can contribute to a Roth IRA at all or are eligible for a retirement savings contribution credit of up to $2,000. As so often is the case, the devil is in the details.