Great news! The IRS has announced their new retirement plan contribution limits for 2013 and they actually increased this year! If you already max out your retirement accounts you can contribute a bit more this year. If you hadn’t quite got to maxing your retirement accounts out yet it might be a bit of a disappointment. Don’t let it be. It is now just a bigger goal to shoot for!
So what are the new limits and how much have they increased from the 2012 limits?
2013 IRA Limits
The limit on IRAs has increased from $5,000 in 2012 to $5,500 in 2013 for both traditional and Roth accounts. The catch up contribution remains the same at $1,000 for those age 50 and older.
*Sidebar!* I just found out IRA doesn’t stand for individual retirement account… it stands for individual retirement arrangement!
So what does this mean if you want to max out your IRA? See the chart below for the amount needed per pay period to max out your IRA.
2013 401(k), 403(b), TSP and Most 457 Plan Limits
The limit on 401(k)s, 403(b)s, most 457 plans and TSPs (Thrift Savings Plans) has increased from $17,000 in 2012 to $17,500 in 2013. Unfortunately, the catch up contributions for employees 50 and older didn’t change and is still $5,500 for 2013.
So what does this mean if you want to max out your 401(k) or other similar plan? See the chart below for the amount needed per pay period to max out your 401(k) or other similar plan.
While I have covered the main types of accounts most people have heard of there are many other pension plan limits that have changed and the IRS has a complete list of them here. You’d be surprised how many different types of plans exist.
Save for Retirement
It is definitely nice to max out a retirement account but it isn’t necessary if you can’t do it right now. I currently max out my Roth IRA but haven’t yet maxed out my Roth 401(k).
The key is to start saving and to save as much as you can. I personally don’t want to be like the masses the media constantly talks about. I want to be prepared for retirement and that means manning up and saving money instead of spending it.
These types of accounts are here to help you by giving your money a tax advantaged status. Do not allow these great opportunities to pass you by. Take advantage and you’ll be happy later.
There is another thing to consider if you want to retire early. In general, in order to withdraw from these types of accounts you must be over a certain age or you will have to pay taxes and penalties on your withdrawals. If you want to retire before that age you must have access to money that won’t be penalized and you might need to invest in a taxable investment account to cover the years before you reach that retirement age.
Do you max out your retirement accounts?