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401(k) Contribution and Tax-Deferral Limit Increases for 2013


Good news for retirement savers. The IRS increased the contribution and tax-deferral limits for 401(k) plans for 2013. Employees can now contribute up to $17,500 per year starting in 2013 -- a $500 increase. Those over fifty years of age may still make additional catch-up contributions of $5,500 a year (or $23,000 per year in total) to their 401(k) accounts.

And if you receive company matching contributions or profit sharing, the all-in tax-deferral limit has been increased from $50,000 to $51,000 for 2013. Here are the key changes to know:

401(k) Limit Increases for 2013
  2013 2012
Employee contribution limit $17,500 $17,000
Annual limit per individual $51,000 $50,000
Age 50+ catch-up amount $5,500 $5,500
Annual compensation limit $255,000 $250,000
Highly compensated employees $115,000 $115,000


Big Advantage for 401(k)s over Traditional IRAs

The tax advantages for 401(k) savers versus those opting to use IRAs or don't have access to a 401(k) plan continues to be big:

401(k) Advantages Over Traditional IRAs in 2013
  401(k) IRA
Annual limit per individual $51,000 $5,500
Age 50+ catch-up amount $5,500 $1,000
Roth income limit None $127K*
Penalty-free access, if needed Yes, via a loan No


*Beginning at $112K, the amount you are allowed to contribute begins to decrease, hitting $0 at $127K for singles.

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