2014 Brings Better Financial Policies

by msullivan12 7. December 2013 15:11

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Retirement Plans Remain Generally Unchanged

The new contribution limit for employees who participate in retirement plans such as 401Ks, 403bs and 457 plans remains unchanged for 2014.  The maximum salary deferral remains $17,500 with a $5,500 catch-up contribution for individuals age 50 or over.

Limits on IRA plans will also remain unchanged for 2014 at $5,500 with a $1,000 catch-up.

Note that the phase-out ranges and eligibility rules will change slightly and are summarized in the chart below:

                                                                                               Modified Gross Income

 

 

2013

2014

Traditional IRA Deduction Phase-out

Single and Head of Households covered by workplace plan.

$59,000- $69,000

$60,000-$70,000

Traditional IRA Deduction Phase-out

Married filing jointly w/ spouse contributor who is covered by a workplace retirement plan

$95,000- $115,000

$96,000-$116,000

Traditional IRA Deduction Phase-out

Married filing jointly and IRA contributor  is not covered by a workplace retirement plan/spouse is

$178,000- $188,000

$181,000- $191,000

Roth IRA Eligibility Phase-out

Single and head of household

$112,000-$127,000

$114,000-$129,000

Roth IRA Eligibility Phase-out

Married filing jointly

$178,000-$188,000

$181,000-$191,000

 

Health Savings Account - a “Medical IRA”

As employers search for ways to lower their health care costs, they’re encouraging employees to sign up for a high-deductible health insurance policy paired with a health savings account. An HSA gives you a triple tax break: Your contributions are sheltered from income taxes, the money grows tax-deferred, and the funds can be withdrawn tax-free for medical expenses. Since these accounts roll from year to year, you can make contributions each year, let the account grow, and use the money in retirement when you may have considerably more medical expenses. Please note that you are able to make contributions to HSAs until age 65, and that you must be enrolled in a high-deductible plan to be eligible for a health savings account.

The limits for HSAs have increased slightly in 2014. The limits for individuals will be $3,300 for individuals and $6,550 for families in 2014. There is an additional catch-up of $1,000 for individuals over the age of 55.

New FSA Rules Enhance Flexibility

A flexible spending account offers the same savings and pretax benefits as an HSA, but to someone in a higher cost health plan — one with a higher premium and lower deductible. It essentially works the same as an HSA, but you can't contribute as much money to it — a maximum of $2,500 a year — and the funds generally don't roll over if you don't use them (however, as noted below, this has changed slightly).

This is because Flexible Savings accounts will now have a bit more flexibility.  The Treasury Department and the Internal Revenue Service have loosened the “use it or lose it” rule for Flexible Spending Accounts for health care, allowing participants in these plans to “carry over” up to $500 from their FSA from year to year.

Up to this point money in these accounts was lost if it was not spent in the calendar year.  Some employer plans include an option of a 2 ½ month grace period after year end.  This may remain in place; however, a health FSA cannot have both a carryover and a grace period.  The maximum individual contribution to an FSA is still $2,500 a year. Note that this does not affect HSAs.

 

Lincoln Financial Advisors does not provide legal or tax advice.

Karen DeRose is a registered representative of Lincoln Financial Advisors Corp.

Securities and advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer (Member SIPC) and registered investment advisor.  Insurance offered through Lincoln affiliates and other fine companies. DeRose Financial Group is not an affiliate of Lincoln Financial Advisors Corp.

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