Every year, about this time, the IRS calculates the cost of living increases, and determines whether the change is enough to trigger an adjustment to the statutory limit/threshold for various areas, including retirement accounts. (Each limit has a statutory threshold so that the limit isn't always changing by just a few dollars. The threshold amount is why limits such as the 401(k) contribution typically either remains the same or changes in increments of $500.) The full list of changes can be found in IR-2014-99 . A few of the most frequently discussed limits are:
- Limit on employee contributions to 401(k), 403(b) and 457 plans increase from $17,500 to $18,000.
- Limit on catch-up contribution for persons age 50 and over to 401(k), 403(b) and 457 plans increase from $5,500 to $6,000.
- Limit on contribution to traditional and Roth IRAs remain the same at $5,500.
- Phase-out for taxpayers contributing to a Roth IRA is $183,000 to $193,000 for married couples filing jointly, and $116,000 to $131,000 for singles and heads of households. (Increased from $181,000 to $191,000 and $114, to $129,000 respectively).
I anticipate more cost of living adjustments to come for other areas in these remaining months of 2014. This also serves as a reminder that it may be a good time to take a look at your contributions so far in 2014 and determine whether any additional contributions would be beneficial if you have not already reached the statutory limit.