No changes to retirement contributions for 2014
- Thread starter tnj2tnj2
- Start date
Interesting.
Does this mean HCE limits are the same as well? For an employer I know well it isn't clear if they have been abiding by that portion of the law and so the HCE limit is a matter of great interest to us.
Does this mean HCE limits are the same as well? For an employer I know well it isn't clear if they have been abiding by that portion of the law and so the HCE limit is a matter of great interest to us.
Theseus
Recycles dryer sheets
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Straight from the horse's mouth...
COLA Increases for Dollar Limitations on Benefits and Contributions
COLA Increases for Dollar Limitations on Benefits and Contributions
gauss
Thinks s/he gets paid by the post
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Note that the defined contribution limit for 2014 has indeed changed from $51,000 in 2013 to $52,000 in 2014.
This can be very important if you are fortunate enough to have a 401k plan where you are allowed to make after-tax contributions. These plans are often found in older legacy corporations.
These plans can facilitate moving a large amount of money into a Roth IRA every year after the income limits for Roth conversions were removed in 2010.
-gauss
This can be very important if you are fortunate enough to have a 401k plan where you are allowed to make after-tax contributions. These plans are often found in older legacy corporations.
These plans can facilitate moving a large amount of money into a Roth IRA every year after the income limits for Roth conversions were removed in 2010.
-gauss
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Bert Cooper
Dryer sheet aficionado
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Is contributing after tax dollars to a 401k a good idea? I think I am allowed to contribute after tax dollars... Haven't seen it as advantageous, but I don't know much.
I'm maxing my 401k contribution now, contributing 5500 to an IRA (make too much for Roth apparently) and have been putting additional dollars into a taxable account.
I'm maxing my 401k contribution now, contributing 5500 to an IRA (make too much for Roth apparently) and have been putting additional dollars into a taxable account.
If you want to you can open a ROTH IRA and convert money from your existing IRA to a ROTH, even in the same the same year you make the contribution, so these days there are, in effect, no income limits for being eligible to contribute to a ROTH.
The only advantage of after tax contributions to your 401(k) is that the gains will be tax deferred. The 401k provider will keep track of the after tax contributions so that come withdrawal time, or in my case rollover to an IRA, the cost basis is transferred.
ziggy29
Moderator Emeritus
It can also be important if you are self-employed and using a solo 401K.
ziggy29
Moderator Emeritus
Another limit not listed here which we've never used but should be affected by in 2014: the "saver's credit" (AKA the retirement savings contribution credit) limit increases to $60,000 (from $59,000) for joint filers ($45K for HoH and $30K separate filers). If I understand it right (never studied it before), this means that for joint filers, the first $2000 per person of each spouse's contributions to IRA and 401K/403B plans receives a tax credit of anywhere from 10% to 50% of the amount saved depending on the specific AGI. This credit is calculated on Form 8880.
For example, if joint filers earning less than $35,500 (using 2013 limits) each contribute $2000 to such plans, 50% of the total contribution ($1000 each, or $2000 total) is a tax credit (or the amount of tax liability if less than $2000). Joint filers earning less than $35,500 probably owe less than $2000 in tax anyway, so they would basically receive a tax credit for the total tax due.
I think that's right. Has anyone here used this before? Am I close? If so, even in a low tax bracket it would be a no-brainer for each of us to contribute $2000 each since there is an instant ROI equal to the applicable percentage of your tax credit on what we contributed (10%, 20% or 50%). These would also reduce MAGI for ACA purposes, so it's a double-win.
For example, if joint filers earning less than $35,500 (using 2013 limits) each contribute $2000 to such plans, 50% of the total contribution ($1000 each, or $2000 total) is a tax credit (or the amount of tax liability if less than $2000). Joint filers earning less than $35,500 probably owe less than $2000 in tax anyway, so they would basically receive a tax credit for the total tax due.
I think that's right. Has anyone here used this before? Am I close? If so, even in a low tax bracket it would be a no-brainer for each of us to contribute $2000 each since there is an instant ROI equal to the applicable percentage of your tax credit on what we contributed (10%, 20% or 50%). These would also reduce MAGI for ACA purposes, so it's a double-win.
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ziggy29, that is correct so far as I know. I got a partial credit last year and should get the full $1000 this year. It isn't a refundable credit. Conventional wisdom says I should be contributing to a Roth IRA since I'm in a low tax bracket, but the existence of the savers credit makes it a better deal to contribute to conventional retirement vehicles.
