Last week I wrote a quick post giving full details about what changes we could expect to see in the 2014 401k contribution limits. So how much was changing? The short answer is that not much was changed from last year.
If you have an IRA in addition to or instead of a company 401k, you’ll want to make sure to stay on top of any increases in contribution limits there as well. Since the contribution limits are so much lower than the 401k to begin with, any increase is always a good thing.
Another reason some folks might want to stay on top of the IRA rules is if they’re making too much money they might not be eligible to contribute to their Roth IRA this year, so it pays to check.
The amount that you can contribute to a traditional or Roth IRA for 2014 has remained the same as the limits for 2013. Some of the AGI based income phaseouts for IRAs have adjusted slightly, however.
Don’t have a Roth IRA yet? Check out this post talking about the best places to open a Roth IRA.
Contribution Limits For Roth & Traditional IRA In 2014
The contribution limit for both Roth and Traditional IRAs remained the same this year. If you are under 50 years old that means you can once again contribute $5,500 to your IRA accounts, just like last year. 50+ years old? You’re also able to make a catch up contributions of $1,000 – which pushes the contribution limit to $6,500.
The limit for the Roth and traditional IRA is a shared limit, so keep in mind if you contribute to one, the limit for the other is reduced. The $5,500 is a single combined limit if you want to max out your contributions.
For example, if you contribute $4,000 to your Roth IRA, you could only contribute $1,500 to your traditional IRA (bump that up by $1,000 if you’re over 50).
Here’s a table showing the 2014 Traditional and Roth IRA contribution limits, along with the limits in years past.
| Year | Age 49 and Below | Age 50 and Above |
|---|---|---|
| 2002-2004 | $3,000 | $3,500 |
| 2005 | $4,000 | $4,500 |
| 2006-2007 | $4,000 | $5,000 |
| 2008-2012 | $5,000 | $6,000 |
| 2013-2018 | $5,500 | $6,500 |
| 2019-2022 | $6,000 | $7,000 |
| 2023 | $6,500 | $7,500 |
| 2024 | $7,000 | $8,000 |
AGI Based Income Phaseouts For IRAs In 2014
Both Roth and traditional IRAs have income phaseouts. What that means is once you reach a certain level of income the amount of you can contribute goes down, and gets completely phased out at some point, or the tax deduction for said contribution starts to go away.
For Roth IRAs single taxpayers with an annual Modified Adjusted Gross Income (MAGI) over $114,000 begin to see their allowable deduction drop until at $129,000 it goes away completely. The limits for Married Filing Jointly investors are $181,000-$191,000.
For Traditional IRAs single taxpayers with an annual Modified Adjusted Gross Income (MAGI) over $60,000 begin to see their allowed deduction drop until at $70,000 it goes away completely. The limits for Married Filing Jointly investors are $96,000-$116,000.
| Roth IRA Income Limits For Contributions (2024) | Contributions are reduced if income is above this amount | Contributions are not available if income exceeds this amount |
|---|---|---|
| Single/Married Filing Separate IF you didn't live together during the year. | $146,000 | $161,000 |
| Married Filing Jointly or qualifying widow or widower. | $230,000 | $240,000 |
| Married filing separately IF you lived with your spouse at any point during the year. | $0 | $10,000 |
Contributions Can Be Made Until Tax Day 2015 For 2014!
If you have a Traditional IRA or Roth IRA, one thing a lot of people don’t realize is that the time to contribute to your account doesn’t end when the clock strikes midnight on December 31st. In fact, if you haven’t contributed the allowed contribution amount by December 31st, you have all the way until tax day to contribute to your account for the previous year.
In fact, you can still open a Roth IRA or a traditional IRA and contribute the fully allowed amount up until tax day. Tax day will fall on Tuesday, April 15th, 2014 next year. So not only can you contribute at the end of this year, you can contribute right up until your taxes are due!
If you do make a contribution in 2014 before tax day, make sure you specify which tax year the contribution is being made for.
Keeping Tabs On Limits And Phaseouts
When you’re contributing to a Roth or Traditional IRA you’ll want to keep an eye on the limits and phaseouts. If your income is reaching phaseout thresholds, you may want to consider reducing your taxable income by contributing to an account like a 401k, or reducing your taxable income by making charitable contributions, etc so that you can continue to be eligible for the account type.
Are you increasing your contributions this coming year, even though the limits haven’t increased?
I don’t have an IRA, but I hope to open one once our student loans are paid off and start funneling some of that cash flow into retirement accounts. I don’t understand why they don’t increase the limits, but I have the same question about HSAs. Gotta love government policy…
The limits are tied to changes in the consumer price index, or inflation rate. So the changes weren’t enough there this year to bump up the limits. I guess we saw one last year though, so it may be another year or so.