People in the United States work almost all their lives and would like something special to show for it. That’s why from an early start they begin to save for retirement so for what they believe is their final years of life, they are well covered in reference to finances. A 401K is a type of retirement savings plan within the United States which falls under the Department of Internal Revenue. The point is that they are defined as “contribution plans” which is either submitted by the employer, the person themselves or both.
2013 marks the start of something very special in regards to changes within the 401K contributions allowed. For example, the IRS has announced the contribution brackets will be increased allowing people to contribute more each year furthermore leading to more interest collected by you on those contributions.
This directly from the IRS department themselves:
“The limit on 401(k)s, 403(b)s, most 457 plans and TSPs (Thrift Savings Plans) has increased from $17,000 in 2012 to $17,500 in 2013. Unfortunately, the catch up contributions for employees 50 and older didn’t change and is still $5,500 for 2013.”
The IRA contribution limit will be increase for workers who meet the income requirements during the year of 2013. The increase will be an additional $500 dollars so the total will be $5,500 which is a jump up from last year which was $5,000. This will allow you to benefit a little more from tax-free benefits since now you can contribute an additional $500 without being taxed for the deposit.
There has been a change in the reporting of the 401(k) participants because they will now be receiving quarterly and annual statements. The biggest changes will be the new disclosure rules regarding fees that are just hitting participant statements now. So, now you’re going to get an annual notice and the fees will be disclosed even on your quarterly statements. These statements will be more upfront about the fees the investments are charging and you now have the ability to get this statement quicker and make a decision if the funds are worth paying the fees charged.
The higher savers credit is a new additional increase for 2013. Couples can now earn up to $1,500 and still take advantage of the savers credit which is a tax credit for retirement up to $1,000 for individuals and $2,000 for couples.
So, what does this mean when saving for retirement?
To take advantage of the full line of 401(k) investments and funds, it is strongly recommended to try to max out the allowed limit each year to get the most tax-free credit. It is also a good idea to start saving early and try to save as much as you can since the full benefits will be seen later on during retirement which will include a financially stable portfolio.
If you’re planning to retire early, than you could face harsh fees and penalties so try to spread out your investments and smart save so you could manage not touching your 401(k) investments until you have reached the age of withdrawal.