Believe it or not, 2014 is just around the corner.
It’s a great time to start planning next year’s retirement contributions. Let’s answer the question on everyone’s mind: What’s the 401k contribution limit in 2014? What about the IRA contribution limit?
401k Contribution Limit in 2014 Stays the Same
The IRS recently published its contribution limit guidelines for 2014. The 401k contribution limit in 2014 will remain the same as it was in 2013. The same holds true for IRA contribution limits in 2014. That means a maximum of $17,500 for your 401k plan, and $5,500 for an IRA.
The catch-up provisions remain the same as well. This means employees aged 50 and above can contribute an additional $5,500 (above and beyond the $17,500 regular limit) in their 401k in 2014. The IRA catch-up limit of $1,000 for fiftysomethings and older also remains in place.
Armed with this knowledge, how can you invest up to the contribution limit in 2014?
Know Your Personal 401k Contribution Limit
Your personal 401k contribution limit and IRA contribution limit can vary from household to household depending on a variety of factors, such as your marital status, income level, source of income (e.g. W2 wages, 1099 contract work, investment income etc.) and other considerations. These may potentially give you scope for more (or fewer) ways to optimize your retirement savings.
For example: If you’re self-employed or you own a business, you may be eligible to open an SEP-IRA, Simple IRA, Roth Solo 401k or Traditional 401k. This can change your personal contribution limits quite substantially.
And if you earn less than a certain amount of income, you may be eligible to open a Roth IRA. In 2014, the adjusted gross income phase-out for Roth IRA eligibility is $114,000 to $129,000 if you’re single or the head-of-household, or $181,000 to $191,000 if you’re a married couple.
| 401k and IRA Contribution Limit | 2014 | 2013 |
|---|---|---|
| 401k Employee Contribution | $17,500 | $17,500 |
| 401k "Catch-Up" Contribution | $5,500 | $5,500 |
| 401k Total Contribution (Employer + Employee) | $52,000 | $51,000 |
| Defined Benefit Plan Limit | $210,000 | $205,000 |
| IRA Contribution (Traditional and Roth) | $5,500 | $5,500 |
| IRA "Catch-Up" Contribution (Traditional and Roth) | $1,000 | $1,000 |
| Trad IRA Phase-Out: Single w/ Workplace Benefits (MAGI) | $60,000 – $70,000 | $59,000 – $69,000 |
| Trad IRA Phase-Out: Married w/ Workplace Benefits (MAGI) | $96,000 – $116,000 | $95,000 – $115,000 |
| Roth IRA Phase-Out: Single or Head of Household (AGI) | $114,000 – $129,000 | $112,000 – $127,000 |
| Roth IRA Phase-Out: Married (AGI) | $181,000 – $191,000 | $178,000 – $188,000 |
| SIMPLE IRA Limit | $12,000 | $12,000 |
| SIMPLE IRA "Catch-Up" | $2,500 | $2,500 |
| SEP-IRA Employer Contribution | $52,000 | $51,000 |
| Solo 401k Employer Contribution | $52,000 | $51,000 |
| Saver's Tax Credit – Single (AGI) | $30,000 | $29,500 |
| Saver's Tax Credit – Head of Household (AGI) | $45,000 | $44,250 |
| Saver's Tax Credit – Married (AGI) | $60,000 | $59,000 |
Maximize Your Employer 401k Matching Program
If your employer offers a 401k matching program, try to maximize it. This is the closest thing you’ll find to a free lunch in the retirement planning world – it’s money on the table that you really shouldn’t walk away from.
Remember, the earlier and the more you invest in your 401k, the more you will benefit from the compounding effect of your returns.
Revisit Your Asset Allocation
How long has it been since you’ve looked at your asset allocation? Your “asset allocation” is the amount you have invested in different types of stocks, bonds and other assets. A diversified portfolio of low-correlated assets is a one of the most important determinants of your long-term portfolio performance.
Services like Jemstep’s Portfolio Manager can give you custom-tailored asset allocation advice that’s based on your personal situation, such as your goals, timeline, risk tolerance, tax structure of your accounts, and other considerations.
Too many American households are unprepared for retirement. Make sure you’re in the minority who are taking all the right steps to prepare for a comfortable and rewarding retirement. 2014 is around the corner – so gear up for another year of contributions that will get you closer to your goals!
Have you thought about your 2014 retirement contributions?
Want investment advice and practical tools about how to allocate and select assets for your retirement portfolio? Visit Jemstep.com and sign up for Portfolio Manager.