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Fund Your Retirement and Invest In What You Know Best!

 Increase Your Retirement Account Available for
Investing by Maximizing Your 2013 Contributions

By John “Jack” Kiley, CPA, CISP

Partner, MidAtlantic IRA, LLC


For retirement plans, the landscape in 2013 will look much like 2012. The new contribution limits have
increased slightly. In calculating these, IRS compares the official cost of living increase from
September of 2011 to September of 2012.

Below is a table of 2013 contribution limits:

IRAs (Traditional & Roth)                  $   5,500

IRA catch up                                          $   1,000

SEP min coverage                                 $      550

SEP Maximum                                      $ 51,000

SIMPLE elective deferral                   $ 12,000

401k elective deferral                         $ 17,500

401k catch up                                       $   5,500

Max Defined Contribution Plan (before catch up)       $ 51,000

Max Defined Contribution Plan (including catch up)    $ 56,500

In reviewing these limits, some definitions and rules need to be kept in mind.

With Traditional IRAs, contributions can only be made to the extent that you have earned income up to the maximum allowed in the table above. Earned income is defined as W-2 income or earnings subject to self employment. There are other qualifiers which we will not discuss here. (Examples: if you have W-2 wages of $50,000 you may contribute $5,000. If you have W-2 wages of $3,000, you may only contribute $3,000).  Also, you cannot contribute after you
reach the age of 70 ½.

Please keep in mind these are contribution limits, not deductible amounts. It is possible to make a nondeductible Traditional IRA contribution. Contact us to discuss your situation.

Roth IRAs follow similar rules with one big exception. For married couples, if your Adjusted Gross Income (AGI) is  greater than $178,000, then your contribution will be limited; and once your AGI rises above $188,000, you are precluded from contributing to a Roth. (For singles the contribution phase out begins at $112,000 and the contribution is fully eliminated at $127,000). Contributions to Roth IRAs can be made after you reach age 70 1/2 provided you meet the compensation requirements referenced above.

With both Traditional and Roth IRAs, taxpayers older than 50 ½ may contribute an additional $1,000.

The minimum Self Employed Pension (SEP) coverage begins for employees earning at least $550. What this
means is that Employers who maintain a SEP plan must contribute for employees earning more than $550 per
the plan calculation.

An elective deferral is the amount of earnings an employee  ‘elects’ to contribute to his respective plan maintained
by the employer. The elective limits remain unchanged for both SIMPLE Plans ($11,500) and for 401k, 403b, and Government plans ($17,500).

Catch up contributions for SIMPLE Plans ($2,500) and other Qualified Plans ($5,500), again remain at their
2012 levels for 2013. There are no catch up provisions for SEPs.

This is a brief overview of the contribution limits to the plans that the majority of Americans maintain. For questions regarding your particular plan, you should contact your plan administrator or feel free to:  Contact Scott Blair at 240/575.3880  x260.