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Retirement plan limits largely unchanged in 2014

The Aberdeen Times of Aberdeen, Idaho

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Practical Money Matters

Anyone who's bought groceries, fdled their gas tank or paid insurance premiums recently would probably be surprised to learn that, according to Department of Labor's Consumer Price Index for Urban Consumers (CPI-U), the rate of inflation is relatively flat - only 1.2 percent from September 2012 to September 2013.

That's bad news for people who were hoping to boost their contributions to an IRA, 401(k) plan or other tax-advantaged retirement savings accounts, since the IRS uses the CPI-U's September year-over-year performance to determine whether or not to make cost-of-living adjustments to many of the retirement contributions you and your employer can make in the following year.

Here are highlights of what will and won't change in 2014:

Defined contribution plans. The maximum allowable annual contribution you can make to a workplace 401(k), 403(b), 457(b) or federal Thrift Savings plan remains unchanged at $17,500. Keep in mind these additional factors:

People over 50 can also make an additional $5,500 in catch-up contributions (unchanged from 2013) The annual limit for combined employee and employer contributions increased by $1,000 to $52,000.

Because your plan may limit the percentage of pay you can contribute, your maximum contribution may actually be less. (For example, if the maximum contribution is 10 percent of pay and you earn $60,000, you could only contribute $6,000.)

Individual Retirement Accounts (IRAs). The maximum annual contribution to IRAs remains the same at $5,500 (plus an additional $1,000 if 50 or older - also unchanged from 2013). Maximum contributions to traditional IRAs are not impacted by personal income, but if your modified adjusted gross income (AGI) exceeds certain limits, the maximum amount you can contribute to a Roth IRA gradually phases out:

For singles/heads of households the phase-out AGI range is $114,000 to $129,000 (increased from 2013's $ 112,000 to $127,000 range). Above $129,000, you cannot contribute to a Roth.

For married couples filing jointly, the range is $181,000 to $191,000 (up from

$178,000 to $188,000).

Keep in mind these rules for deducting traditional IRA contributions on your federal tax return:

If you're single, a head of household, a qualifying widow(er) or married and neither spouse is covered by an employer-provided retirement plan, you can deduct the full IRA contribution, regardless of income.

If you are covered by an employer plan and are single/head of household, the tax deduction phases out for AGI between $60,000 and $70,000 (up from $59,000 to $69,000 in 2013); if married and filing jointly, the phase-out range is $96,000 to $116,000 (up from $95,000 to $115,000).

If you're married and aren't covered by an employer plan but your spouse is, the IRA deduction is phased out if your combined AGI is between $181,000 and $191,000 (up from $178,000 to $188,000).

For more details, read IRS Publication 590 at www.irs. gov. Retirement Saver' Tax Credit. As an incentive to help low- and moderate-income workers save for retirement through an IRA or company-sponsored plan, many are eligible for a Retirement Savers Tax Credit of up to $1,000 ($2,000 if filing jointly). This credit lowers your tax bill, dollar for dollar, in addition to any other tax deduction you already receive for your contribution.

Qualifying income ceiling limits for the Savers' Tax Credit increased in 2014 to $60,000 for joint filers, $45,000 for heads of household, and $30,000 for singles or married persons filing separately. Consult IRS Form 8880 for more information.

Alderman directs Visa s financial edudixtion \programs. Follow him on Twitter at www.twitter. com/PracticcalMoney.

The Idaho Irrigation Equipment Association is sponsoring two presentations about facing the challenges to sustain the Eastern Snake Plain Aquifer (ESPA). They will be given on Wednesday, Jan. 15, from 10 a.m. to 12 noon at the Best Western Plus Burley Inn and Convention Center, 800 Overland Ave., Burley.

The first presentation, "Impacts from Managed Aquifer Recharge on the Eastern Snake Plain," will be given by Mike McVay, a technical hydrogeologist with the Idaho Department of Water Resources.

The second presentation, "Soft Conversion and Aquifer Recharge: Preserving Water for the Future," will be given by Brian and Jaxon Higgs for the A&B Irrigation Distriil and Magic Valley Ground Water District.

The presentations are pm of the Idaho Irrigation Equipment Show & Conference and are free. No registration is re quired.

The trade show and technical classes will be on Thursday, Jan. 16, from 8 a.m. to 4:30 p.m.

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Original Publication Date: January 15, 2014

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