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Health & Fitness

IRS Boosts Limits on IRA Contributions For the First Time Since 2008

Retirement savings just got a little bit easier as IRS raises retirement contribution limits.

Saving for retirement has always been hard but the IRS is making the task a bit easier by increasing the contribution limits of employer retirement plans and the vastly popular Individual Retirement Accounts.

On Oct. 18, the IRS announced that contribution limits for the most commonly used retirement accounts -- IRAs and 401(k) plans -- would be going up.

 For 2012, individuals can put up to $5,000 into an IRA and as much as $17,000 in a 401(k) account.

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 Starting next year, these limits will increase by $500 each, making the 2013 IRA limit $5,500 and 401(k)s $17,500.

 The additional amounts that those age 50 or older are allowed to put in will remain the same – an extra $1,000 for IRAs and $5,500 for 401(k)s, often referred to as ‘catch-up’ contributions.

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These increases are designed to allow your retirement savings to keep pace with inflation and the rising cost of living.

While IRA limit has been stuck since 2008, this is the second straight year 401(k) limits have been increased. 

In addition to contribution limits, the IRS has also raised the income threshold for IRA contributions for both individuals and married couples while boosting the amount taxpayers can gift tax free to $14,000.

If you have any questions regarding your retirement planning contact us at 410-575-3120.

Shawn Miller is a fee-only, Financial Planner with Sovereign Financial Services in Bel Air, MD. Shawn provides advice to individual, businesses, and endowments.  You can reach Shawn at 410.575.3120.

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