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Investing

Changes to 401 (K) And IRA Contributions For The Year 2014

Image Credit: money.usnews.com

The year 2014 will bring some less significant changes to 401(k) and IRA contribution rules. The changes will mainly impact the IRA contribution scheme. The shared changed for retirement plans that brings a bigger saver’s credit threshold is sure to be welcomed by a larger population of taxpayers.

IRA Contribution Limits

The IRA contribution limits will stay the same as 2013 with the worker’s contribution amount fixed at $5500 in 2014. The individuals aged 50 and above can contribute an additional $1000 as a catch up contribution.

The changes in the IRA income limits are as follows:

1) Workers who are entitled to a workplace retirement plan with modified adjusted gross income of $60,000 to $70,000 will not be eligible to file for a tax deduction. The range has been increased from $59,000 to $69,000 last year.

2) Married couples with workplace retirement plans in the range of $96,000 to $116,000 per household will not be able to file for tax deduction as well.

3) Workers who do not have workplace retirement plans, but are married to a spouse who has one, and if their shared income is between $181,000 and $191,000, are not eligible for tax deduction. This range has been increased by $3000 from 2013.

Higher Roth IRA Income Cutoffs

A major highlight of the IRA contribution changes for the year 2014 is the higher Roth IRA income cutoffs. Workers can earn $2000 more ($3000 for couples) in 2014 and still be qualified to contribute towards Roth IRA. Investors who earn more than the adjusted gross income (AGI) phase-out range for Roth IRAs ($114,000 to $129,000 for singles and heads of household and $181,000 to $191,000 for married couples) may still be able to convert traditional IRA assets to a Roth. The only hitch is that the conversion of traditional IRA assets to Roth might be taxed.

Limits for 401(k) Contributions

The limits for 401(k) contributions remain unchanged from 2013. Taxpayers can contribute up to $17,500 to their 401(k), 403(b), most 457 plans and the federal governments Thrift Savings Plan in 2014. The catch-up contribution limit for employees aged 50 and older has been left unchanged at as well $5,500.

Overlapping Changes

A major change in the tax cut off that it will benefit the low and moderate income workers saving in 401 (k)s and IRAs with the eligibility to claim a tax credit of up to $1,000 for individuals and $2,000 for married couples. Couples will be eligible to claim the saver’s credit until their AGI exceeds $60,000 (which is $1,000 up from last year’s $59,000). Moreover, the heads of households can claim the saver’s credit until their AGIs exceeds $45,000, while individuals can claim it until their AGIs reach $30,000.

According to a statement released by the US Internal Revenue Service, the reason for the minor changes in the 401 (k) and IRA rules is due to the fact that inflation, as measured by the consumer price index, did not meet the statutory thresholds for their adjustment. Hence, the contribution caps have not been raised significantly for the year 2014.

About the Author

Rick Pendykoski is the owner of Self Directed Retirement Plans LLC, a retirement planning firm based in Goodyear, AZ. He regularly blogs at Biggerpocket, SocialMediaToday, MoneyForLunch & his own blog where he focuses on retirement planning, investment, securing future related topics.

January 19, 2014

Investing

What Do You Use Your TFSA For?

The Tax Free Savings Account (TFSA) has been around for a few years now. A TFSA can be used for virtually any type of savings goal. So, what are you saving for in your TFSA?

When TFSAs were first introduced in 2009, my husband and I each opened one up immediately. We had very little knowledge of how we could use them, but we were attracted by the feature of not having to pay income tax on any interest we earned on the accounts.

Consider investing – As time progressed and we learned more about the TFSA, we bought some investments within our TFSAs, as we realized that we could save for longer term goals within these accounts, too, not just short term ones.

Open more than one – We also discovered that we could open up more than one – by doing so we could save for different savings goals in different TFSAs, eliminating confusion.

November 6, 2013

Investing

Investing 101: Top 5 Investing Rules You Should Know

When it comes to investing your money for the future, many questions arise. Where do I invest my hard-earned money? How should I go about saving for my retirement or my children’s education? If you follow a few simple steps, you’ll find the answers to these questions and more. So, make goals for yourself and watch the money roll-in.

1. Make a Plan/Set Goals

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Image via Flickr by 401(K) 2013

Making a plan before you start investing is a great way to pinpoint exactly what you wish to achieve. If you’re planning for your kids’ future or your own, it’s important to know where you presently stand. Make sure to calculate your debts, assets, and savings to see what you have available to invest. From the information you gather, you should give yourself a decent idea of where to invest.

July 24, 2013

Investing

What Can Investing In Stocks Do For You?

For many people the stock market is one of those things that they have no interest in and they assume that you need money to actually make money with it. Just know that the stock market is something that anybody can use and if done right you can make a lot of money.

Let’s set one thing straight right now though, the stock market is not a get rich quick scheme. If you have a lot of money in the stock market, then you can make a lot of money fast and you can lose a lot of money fast. Now, if you only have a few hundred dollars, then you have just as good of a chance to make money but it will take you a little bit longer. This is where you want to be. If your goal is to double your money within 3 years, then that is a great goal.

So, what else can stocks do for you?

Stocks are a great way to put money away. This is similar to that of a savings account, however, you will normally get a higher return on your money and you also run the risk of losing your money. This is why some people don’t feel the stock market is right for them. Trust me, the stock market is a great place to put at least a little bit of money. I understand you don’t want to lose it, however, just think about what it will be spent on if you have it sitting in a savings account.

July 3, 2013

Investing

The Benefits Of Mobile Trading

In the 21st century, people have a new way of interacting with each other and making personal and business connections. This reflects on mobile trading success among traders across the world.

Any company that provides trading platforms for binary options that is respectable and trustworthy should have a mobile trading app. One of the leading binary option companies that already does have a binary app is any option mobile app. The app is simple, easy on the eyes and most importantly, it suits everyone regardless of their trading ability.

June 2, 2013

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