Paycheck Chronicles

2014 Retirement Contribution Limits


Planning for 2014?  Then you will want to know that the contribution limits for Thrift Savings Plan (TSP) and Individual Retirement Arrangement (IRA) account has not changed from the 2013 limits.

Thrift Savings Plan

The regular 2014 contribution limit for TSP will remain $17,500.  That's great for those of us who have automatic deductions set up - no change necessary.  However, there are the usual exceptions:  If you are older than 50, you may contribute an additional $5,500 of regular pay to your TSP account.

There is also the "annual addition limit," which is $52,000.  This is tricky for a number of reasons.  First, the term "annual addition limit" means the total of all contributions, including tax-deferred, tax-exempt, and other civilian contributions.  For military members, it basically means the total amount you can contribute in all your contributions, including those made in a tax-exempt combat zone.  However, you can't use tax-exempt money to contribute to a Roth TSP beyond the regular contribution limit.

It is confusing, but my friend Doug has written a great article explaining the nuances:  Maximizing TSP Contributions From A Combat Zone.

Individual Retirement Arrangements

The 2014 IRA contribution limits will remain $5,500 per individual, or $6,500 if over age 50.  However, the income limitations have changed.

If you have a workplace retirement plan (TSP counts), the tax deduction for traditional IRA contributions is phased out for those who have modified adjusted gross incomes (AGI) between $60,000 and $70,000.  For married couples with two workplace retirement accounts, the phase-out range  will also climb by $1,000 to between $96,000 and $116,000. If one spouse has a workplace retirement account, and the other doesn't (pretty common in military couples), the tax deduction is phased out if the couple's income is between $181,000 and $191,000, which is $3,000 more than in 2013. Roth IRA income limitation have changed, too.   Workers can earn $2,000 more ($3,000 for couples) in 2014 and still be eligible to contribute to a Roth IRA. The AGI phase-out range for Roth IRAs is $114,000 to $129,000 for singles and heads of household and $181,000 to $191,000 for married couples.

Tax Credit For Retirement Contributions

Low- and moderate-income workers who save for retirement in 401(k)s and IRAs are eligible to claim a tax credit that can be worth as much as $1,000 for individuals and $2,000 for married couples. Couples can claim the saver's credit until their AGI exceeds $60,000.  The limit $45,000 for heads of household and $30,000 for individuals.   This is an awesome credit - be sure take advantage of it if your income limits are below the tresholds!

Be sure to utilize these tax-advantaged retirement savings accounts, especially when your income is lower.  A little bit every year will add up.


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