The new year always seems to bring new tax law changes, and this year is certainly no exception. One area of tax law that can be counted on to change from year to year is the set of rules that govern retirement savings accounts. Thus far, the majority of the rules remain unchanged from 2013, although there is still plenty of time left in the year for new changes (and changes can even occur next year but made retroactive to 2014).
Retirement Account Eligibility. The eligibility threshold to be able to make tax-deductible contributions to traditional IRAs increased in 2014, as did the contribution eligibility for Roth IRAs.
Single individuals covered by an employer-sponsored plan can make tax-deductible IRA contributions with an income of $60,000 (which represents a $1,000 increase). A married individual covered by an employer-sponsored plan has full deductibility up to an income of $96,000 (again, a $1,000 increase). A married individual who isn’t covered by an employer plan (but whose spouse is) has full deductibility up to $181,000 (a $3,000 over 2013).
Individuals looking to contribute to a Roth IRA can do so if they have an income not exceeding $114,000 (a $2,000 increase over last year), and married taxpayers can make a full contribution if their income is less than $181,000 (a $3,000 increase).
Retirement Account Contribution Limits. The contribution and deferral limits for the major retirement plans all remain unchanged for 2014. The annual contribution limit for traditional and Roth IRAs is still $5,500, with an additional $1,000 “catch-up” contribution available to savers aged 50 and over. Similarly, the deferral limits for 401(k) plans remain unchanged in 2014 (at $17,500), as do the limits for SIMPLE 401(k) plans (at $12,000).
The MyRA. Perhaps the biggest change that may occur in 2014 is still just in the planning stages. In his 2014 State of the Union Address, the President proposed the creation of a new retirement savings account none as the “myRA.” This new account looks to be a government-sponsored alternative to the IRA structure, and its principal features are (1) a guarantee that the principal balance in the account will never decline, (2) no account fees, and (3) very low opening balance and contribution requirements. It remains to be seen whether this new structure will ever come into being, or whether it can become a viable alternative to the well-established IRA.
Market Volatility. The first months of 2014 continue to see fairly high levels of volatility in various investment markets. Retirees must not become complacent in their retirement investing strategies, and should always be open to exploring new types of investments if it helps them improve their overall risk/reward balance.
A self-directed IRA with a custodian such as Quest Trust Company can be a great way to invest all or a portion of your retirement funds in alternative assets such as real estate, private equity and even precious metals.