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Home » IRA's, Roth IRA

2013 Traditional & Roth IRA Maximum Contribution Limits Increase for First Time in Years

Last updated by on 21 Comments

Last week I noted the increase of the 2013 maximum 401K contribution.

At the same time, the IRS also announced that the 2013 IRA maximum contribution and income limits were increasing as well, and it’s a nice 10% jump to $5,500 (up from the 2012 IRA contribution limit of $5,000).

Update: the 2014 maximum 401K contribution & income limits have since been announced.

This applies to both the Traditional IRA and Roth IRA. Note that you can have each, but the max contribution is for both combined.

The maximum IRA contribution actually did increase for the first time in years, and the income limits for both the Traditional IRA and Roth IRA increases as well.

2013 Maximum Roth & Traditional IRA Contribution

The IRS adjusts maximum contribution limits according to cost of living adjustments.

Over the last decade or so, when they increase the limits, they usually do it in $500 increments to match cost of living adjustments.

The maximum IRA contribution has been stuck at $5,000 since the 2008 calendar year, meaning there had been no changes for 4 straight years!

I’m happy to finally see an increase – particularly for those who don’t have the luxury of a 401K.

2013 Maximum IRA Catch-up Contribution Also Increases

maximum IRA contributionFor those age 50 and over, the 2013 IRA catch-up contribution will stay the same, by adding an additional $1,000. Since the standard contribution increases to $5,500, this means the 2013 maximum catch-up contribution is $6,500 in total.

You are eligible for the catch-up contribution if you turn 50 during any day in the calendar year.

2013 Traditional IRA Income Limits

IRA’s provide a great way to limit your tax liability in the present (Traditional IRA) and in the future (Roth IRA). There are, however, contribution phaseout limits that are based on your income. The good news is that those limits (also tied to inflation) will increase in 2013.

Keep in mind that with Traditional IRA’s, the limits and phaseouts only dictate how much you can deduct from your taxes, not if you can contribute or not. With Roth’s, the limits and phaseouts dictate how much  you can actually contribute, since Roth contributions are not deductible.

Traditional IRA income limits vary slightly from Roth IRA’s (which I’ll get to in a bit) in that they are tied to whether or not you your employer sponsors a retirement plan for you.

If you DO HAVE a retirement plan with your employer:

  • Single or head of household: If your MAGI is $59,000 (up from $58,000) or less, you can take a full deduction. If more than $59,000, but less than $69,000 (up from $68,000) – you get a partial deduction. If over $69,000, you cannot take a deduction.
  • Married filing jointly or qualifying widow(er): If your MAGI is $95,000 (up from $92,000) or less, you can take a full deduction. If more than $95,000, but less than $115,000 (up from $112,000) – you get a partial deduction. If over $115,000, no deduction.
  • Married filing separately: If your MAGI is less than $10,000, you can take a partial deduction. If $10,000 or more, no deduction.

If you DO NOT HAVE a retirement plan through an employer:

  • Single, head of household, or qualifying widow(er): Any MAGI permits a full deduction.
  • Married filing jointly or separately with a spouse who is not covered by a plan at work: Any MAGI permits a full deduction.
  • Married filing jointly with a spouse who is covered by a plan at work: If your MAGI is $178,000 or less, you can take a full deduction. If more than $178,000 (up from $173,000), but less than $188,000 (up from $183,000), you can take a partial deduction. If $188,000 or more, no deduction at all.
  • Married filing separately with a spouse who is covered by a plan at work: If your MAGI is less than $10,000, you can claim a partial deduction. If $10,000 or more, no deduction.

2013 Roth IRA Income Limits

The 2013 Roth IRA income phaseout limits are as follows:

  • Married filing jointly or qualifying widow(er): If your modified gross adjusted income (MAGI) is $178,000 (up from $173,000 in 2012), you can contribute up to the $5,500 max. If at least $178,000 up to $188,000 (both up $5,000 over 2012), your contribution limit is phased out (see IRS publication 590). If $188,000 and above, you cannot contribute to a Roth IRA.
  • Single, head of household, or married filing separately and you did not live with your spouse at any time during the year: If under $112,000 (up from $110,000 in 2012), you can contribute up to the $5,500 maximum. If at least $112,000 up to $127,000 (was $125,000 in 2012), your contribution limit is phased out. If $127,000 and up, you cannot contribute to a Roth IRA.
  • Married filing separately and you lived with your spouse at any time during the year:If MAGI is between $0 and $10,000, your contribution limit will phase out. If $0, you can contribute up to the $5,500 maximum ($6,500 if over 50 years old). If $10,000 and above, you cannot contribute to a Roth IRA.

Taking Advantage of IRA’s

If you have a bunch of old 401K’s sitting around, I’d definitely recommend looking at consolidating your 401K’s and rolling over to an IRA. They typically have lower fees associated and trades are often cheaper. I have a Roth and Traditional IRA with TradeKing.

Also, note that you can still contribute to your IRA’s for the 2012 calendar year up until the tax deadline next April. And you can begin contributing for 2013 on Jan. 1, 2013.

Will you contribute to an IRA for the 2012 calendar year? How much?


About the Author
I am G.E. Miller, & this is my story. My goal is financial independence ASAP. If you share that goal, join me & 7,500+ others by getting FREE email updates. You'll also find every post by category & every post in order.


21 Comments »
  • Quick question:

    I have a 401K through work. My husband doesn’t have one. Can he contribute to both a Traditional IRA and a ROTH IRA, or does he have to pick?

  • I haven’t been able to set up an IRA due to the earned income rule (I’m a grad student and get paid through a fellowship), which I find very frustrating. I don’t see what the point is in not letting students save for retirement if they choose to.

    • George P Burdell says:

      You don’t need a IRA or 401k to save for retirement…

      • True, but missing out on the tax-advantaged status can cost you a lot of money in the long run. Imagine you contributed $5500/year to a taxable brokerage account from ages 23 to 27. Assuming an annual return of 7% and a tax rate of 15% (the current tax rate for qualified dividends and long term capital gains), those contributions would be worth about $208k by age 60. Now imagine you contributed those same amounts to a ROTH IRA and received the same 7% but with the tax free status. Now those contributions are worth about $294k by age 60. That’s a difference of about $86k. Imagine if Congress tried to levy a tax of $86k on people reaching retirement age. People would be furious! But that’s essential what they are doing by not allowing grad students to participate in these retirement accounts. And I haven’t even mentioned missing out on the Saver’s Credit…

        • George P Burdell says:

          Sure, I understand. I max out Roth, 401k, and put a sizable chunk into a taxable account each year. I worked while in high school and college. I got paid under the table so I wasn’t able to put it in Roth. I invested in a normal taxable account. By the time I graduated from college, I had a down payment for a house.

          I just hope you haven’t missed out on the stock market run the past couple years. The stock market has doubled since the crash of 2009.

  • Adrienne says:

    It’s important to note that the traditional IRA limits for those with an employer plan are only limits on who can DEDUCT the contribution. The post makes it seem like those over the limits cannot contribute, which is not true.

      • Adrienne says:

        Yes, it is true for Roths. But anyone at any income level can contribute to a Traditional IRA.

        • Andrew says:

          I am just finding this out now. Why would someone do this, though? Is there any benefit to this, versus keeping the money in a regular investment account?

          • CP says:

            Andrew: your capital gains are still tax deferred, although if you’re not able to deduct anything up front then you should contribute to a Roth instead (tax-free gains instead of just tax-deferred). Interestingly, if your income is above the Roth contribution threshold, you can use a traditional IRA as a workaround – make a post-tax contribution to a traditional IRA then immediately rollover into a Roth IRA. Just make sure you don’t have any pre-tax contributions in the traditional IRA that aren’t getting rolled over as this reduces the benefit and complicates the accounting.

    • KR says:

      Adrienne,
      You’re absolutely correct in your statement. However, anyone recommending an individual contribute to a traditional IRA without being able to deduct it from their tax return, needs to visit with a comprehensive Financial Planner AND a CPA or seek other advise.
      My point is, 100% of the distributions from a traditional IRA are taxed at ordinary income. Using after tax earnings to contribute to a tax deferred traditional IRA will mean that an individual will be taxed twice on the contributions and once on the gains. Keep in mind, I’m only referring to contributions that are non-deductable on form 1040.
      Personally, I’d open a non qualified account. The current tax code (2012) for long term cap gains, dividends and interest is 0%, 15% or 20%. It’s better to pay taxes once and only on the gains, dividends and/or interest.

  • This comes as excellent news! My wife and I both max out our IRA’s, so this just makes it better. Great timing too with the raise in the 401k limit!

  • garrett says:

    what is the reason for employer sponsored plans (401k, 403b, etc) having such a high limit (17,500) compared to IRAs (5,500)?

  • danny boy says:

    So I’m above the income limits for a roth contribution but I can still dump $ into a trad and then convert into a roth right? Kinda backdooring my contributions into a roth…

    Doesn’t that mean there really isn’t an income limit to get money into a roth?

  • Robert says:

    My wife and i will have married filing jointly income approaching $250,000 in 2013. Im trying to determine if we can contribute to a traditional IRA (which we have) base on income limitations. Im hoping to use the contribution to reduce 2013 AGI. We both have sponsored 401k plans with our employers, but im looking for above the line ways to reduce taxable income in the event that bush era tax cuts are extended for those that have AGI less than 250,000. Your guidance is much appreciated

  • swakyaby says:

    KR, it’s not true that any aftertax contributions to an IRA (for those individuals whose income exceeds the limits for pretax contributions) get taxed twice. Only the gains are taxed as ordinary income once you begin withdrawals. Your aftertax contributions are not taxed again when you withdraw. Any gains are tax-deferred until you begin to withdraw from your IRA. It does make tax preparation and eventual IRA withdrawals a little more complicated, however.

  • Randy says:

    if your employer provides a 401k plan, is that considered a “retirement plan” or does that refer to pension plans only?

  • Jim says:

    Can a 60 year old make a partial Roth IRA contribution on $3000 earned income and still be eligible to contribute the additional
    $1000 “catch up ” provision ?

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