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The IRS recently published the new contribution limits for various retirement plans for 2014. These limits are indexed to inflation, and as such sometimes they do not increase much year over year, and sometimes they don’t increase at all. This year we saw virtually no increases for most all contribution amounts, but as usual the income limits increased for most types of account.
IRAs
The annual contribution limit for IRAs (both traditional and Roth) remains at $5,500 for 2014. The “catch up” contribution amount, for folks age 50 or over, also remains at $1,000.
The income limits for traditional (deductible) IRAs increased slightly from last year: for singles covered by a retirement plan, your Adjusted Gross Income (AGI) must be less than $60,000 for a full deduction; phased deduction is allowed up to an AGI of $70,000. This is an increase of $1,000 over the limits for last year. For married folks filing jointly who are covered by a retirement plan by his or her employer, the AGI limit is increased to $96,000, phased out at $116,000, which is also a $1,000 increase over last year’s limits. For married folks filing jointly who are not covered by a workplace retirement plan but are married to someone who is covered, the AGI limit for deduction is $181,000, phased out at $191,000; this is an increase of $3,000 over 2013’s limits.
The income limits for Roth IRA contributions also increased: single folks with an AGI less than $114,000 can make a full contribution, and this is phased out up to an AGI of $129,000, an increase of $2,000 at each end of the range. For married folks filing jointly, the AGI limits are $181,000 to $191,000 for Roth contributions, up by $3,000 over 2013.
401(k), 403(b), 457 and SARSEP plans
For the traditional employer-based retirement plans, the amount of deferred income allowed has remained the same as well. For 2014, employees are allowed to defer up to $17,500 with a catch up amount of $5,500 for those over age 50 (all figures unchanged from 2013). If you happen to work for a governmental agency that offers a 457 plan in addition to a 401(k) or 403(b) plan, you can double up and defer as much as $35,000 plus catch-ups, for a total of $46,000.
The limits for contributions to Roth 401(k) and Roth 403(b) are the same as traditional plans – the limit is for all plans of that type in total. You are allowed to contribute up to the limit for either a Roth plan or a traditional plan, or a combination of the two.
SIMPLE
Savings Incentive Match Plans for Employees (SIMPLE) deferral limit also remains unchanged at $12,000 for 2014. The catch up amount remains the same as 2013 at $2,500, for folks at or older than age 50.
Saver’s Credit
The income limits for receiving the Saver’s Credit for contributing to a retirement plan increased for 2014. The AGI limit for married filing jointly increased from $59,000 to $60,000; for singles the new limit is $30,000 (up from $29,500); and for heads of household, the AGI limit is $45,000, an increase from $44,250. The saver’s credit rewards low and moderate income taxpayers who are working hard and need more help saving for retirement. The table below provides more details on how the saver’s credit works (Form 8880 is not updated yet for 2014, so the figures for the 50% and 20% limits will likely change):
| Amount of Credit | Married Filing Jointly | Head of Household | Single/Others |
|---|---|---|---|
| 50% of first $2,000 deferred | $0 to $35,500 | $0 to $26,625 | $0 to $17,750 |
| 20% of first $2,000 deferred | $35,501 to $38,500 | $26,626 to $28,875 | $17,751 to $19,250 |
| 10% of first $2,000 deferred | $38,501 to $60,000 | $28,876 to $45,000 | $19,251 to $30,000 |
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Hello Jim,
I would appreciate if you could help me understand the distinction between the two sets of income limits that apply to married couples:
” For married folks filing jointly who are covered by a retirement plan by his or her employer, the AGI limit is increased to $96,000, phased out at $116,000, …. For married folks filing jointly who are not covered by a workplace retirement plan but are married to someone who is covered, the AGI limit for deduction is $181,000, phased out at $191,000″
More specifically, which limit applies to a married couple where the husband works and has an AGI of, let’s say, $130,000 and is covered by his employers 401-K plan, while the wife is a stay-at-home mom, with no employer and no retirement plan of her own? If this couple contributes to a traditional IRA in the wife’s name, is the contribution deductible on their joint return?
I’ve always found this very confusing, seems like a good time to sort it out!
Thanks,
Jim
Hi Jim –
Your example is of an individual who is not covered by an employer’s plan but is married to someone who is. Therefore the limit for full deductibility is $181,000, and the AGI you mentioned is below that limit, so the IRA contributions for the wife who isn’t covered by an employer plan would be deductible.
Hope this helps!
jb
Yes, thanks! I guess what I was missing is that the lower AGI limits apply when *both* husband and wife are covered by their own workplace retirement plans, i.e. both work.