Maximum Allowed Contributions for IRAs Have Increased!

For the first time in four years (since 2008) the maximum allowed contributions for IRAs have increased from $5000 to $5500. I know this may not help most students right now, but it will help in the future.  This increase is for both traditional and Roth IRAs.  The income levels have been increased as well. 

Limits for Traditional IRA in 2013

If you DO HAVE a retirement plan with your employer:

• Single or head of household: If your modified gross adjusted income (MAGI) is $59,000 (up from $58,000) or less, you can take a full deduction. If more than $59,000, but less than $69,000 (up from $68,000) – you get a partial deduction. If over $69,000, you cannot take a deduction.
• Married filing jointly or qualifying widow(er): If your MAGI is $95,000 (up from $92,000) or less, you can take a full deduction. If more than $95,000, but less than $115,000 (up from $112,000) – you get a partial deduction. If over $115,000, no deduction.
• Married filing separately: If your MAGI is less than $10,000, you can take a partial deduction. If $10,000 or more, no deduction.

If you DO NOT HAVE a retirement plan through an employer:

• Single, head of household, or qualifying widow(er): Any MAGI permits a full deduction.
• Married filing jointly or separately with a spouse who is not covered by a plan at work: Any MAGI permits a full deduction.
• Married filing jointly with a spouse who is covered by a plan at work: If your MAGI is $178,000 or less, you can take a full deduction. If more than $178,000 (up from $173,000), but less than $188,000 (up from $183,000), you can take a partial deduction. If $188,000 or more, no deduction at all.
• Married filing separately with a spouse who is covered by a plan at work: If your MAGI is less than $10,000, you can claim a partial deduction. If $10,000 or more, no deduction.

Limits for Roth IRA in 2013

The 2013 Roth IRA income phaseout limits are as follows:

• Married filing jointly or qualifying widow(er): If your MAGI is $178,000 (up from $173,000 in 2012), you can contribute up to the $5,500 max. If at least $178,000 up to $188,000 (both up $5,000 over 2012), your contribution limit is phased out. If $188,000 and above, you cannot contribute to a Roth IRA.
• Single, head of household, or married filing separately and you did not live with your spouse at any time during the year: If under $112,000 (up from $110,000 in 2012), you can contribute up to the $5,500 maximum. If at least $112,000 up to $127,000 (was $125,000 in 2012), your contribution limit is phased out. If $127,000 and up, you cannot contribute to a Roth IRA.
• Married filing separately and you lived with your spouse at any time during the year:If MAGI is between $0 and $10,000, your contribution limit will phase out. If $0, you can contribute up to the $5,500 maximum. If $10,000 and above, you cannot contribute to a Roth IRA.

If you want more information check out the IRS publication 590.

 There is no way I can put away $5500 for myself and my husband.  Frankly there is no way I could put away even $5500 total.  However, once I graduate this will start being very useful to me.  We plan to say 20% once we both graduate (we are older than most students) and this will allow us to stick with IRAs to do so until we earn $55,000.  And since often the prices of mutual funds is better in an IRA than a 401k or 403b, I am very happy.    Maybe in the next two years it will have gone up even more.