2014 401k and IRA Contribution Limits

Understanding your retirement

The government shutdown in the first half of October delayed the September CPI release by two weeks. Inflation was very low in the last 12 months. According to the government, the Consumer Price Index for Urban Consumers (CPI-U) in September 2013 was 1.2% higher than the same measure a year ago in September 2012.

This number made it possible to calculate the 2014 retirement plan contribution limits. Because of low inflation and how the limits can only increase by a minimum increment, 401k and IRA contribution limits for 2014 will stay the same as in 2013 for the most part.

401k/403b/457 Elective Deferral Limit

401k/403b/457 contribution limit will stay the same at $17,500 in 2014.

If you are self-employed, the total employer plus employee contributions to all defined contribution plans by the same employer will go up by $1,000 from $51,000 to $52,000 in 2014.

SIMPLE 401k and SIMPLE IRA Contribution Limit

SIMPLE 401k and SIMPLE IRA plans have a lower limit than 401k plans. It will also stay the same at $12,000 in 2014.

Traditional and Roth IRA Contribution Limit

Traditional and Roth IRA contribution limit will also stay the same at $5,500 in 2014.

All Together

  2013 2014 Increase
Limit on employee contributions to 401k, 403b, or 457 plan $17,500 $17,500 None
Limit on age 50+ catchup contributions to 401k, 403b, or 457 plan $5,500 $5,500 None
Traditional and Roth IRA contribution limit $5,500 $5,500 None
Traditional and Roth IRA age 50+ catchup contribution limit $1,000 $1,000 None
SIMPLE 401k or SIMPLE IRA contributions limit $12,000 $12,000 None
SIMPLE 401k or SIMPLE IRA age 50+ catchup contributions limit $2,500 $2,500 None
Maximum annual additions to all defined contribution plans by the same employer $51,000 $52,000 $1,000
Highly Compensated Employee definition $115,000 $115,000 None

[Update on Oct. 31, 2013]: The IRS issued IR-2013-86 Pension Limitations 2014, which confirmed all the numbers I calculated on my own long ago.

[Photo credit: Flickr user SalFalko]

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Comments

  1. slug | sunkcostsareirrelevant.com says

    Sad, but this is somewhat of a relief for me. It’s a lot of work to max out a 401k and 2 Roth’s each year. If the maxes had gone up, it would have been even more of a struggle….but I still would’ve found a way.

  2. sscritic says

    Harry knows how to calculate this. The IRS uses two different dates and methods to calculate cost of living increases. This one comes from section 1 of the IRS code, 26 USC 1.

    “For purposes of paragraph (2), the cost-of-living adjustment for any calendar year is the percentage (if any) by which—
    (A) the CPI for the preceding calendar year, exceeds
    (B) the CPI for the calendar year 1992.

    (4) CPI for any calendar year
    For purposes of paragraph (3), the CPI for any calendar year is the average of the Consumer Price Index as of the close of the 12-month period ending on August 31 of such calendar year.”

    This is actually the method for adjusting tax brackets (so you can do that too if you wish), but is referenced by other sections of the code (perhaps with a changed base year).

    Note that other cost of living increases use 3 month averages, just as social security does, but this uses the full year average, September to August, which is why the recent announcement of the August CPI makes this possible.

    • Harry says

      IRAs use September-to-August averages. Qualified plans use Q3 averages, but because of how the amounts round down to nearest increment, I don’t really need the September number to confidently project the 2014 limits.

  3. David says

    Now that I know next year’s cap I can plan. I turn 50 in Dec and will max out the IRA this year and work my magic again nect year.

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