By Sophia Bera
NEW YORK (AdviceIQ) -- Did you contribute all money allowed to your individual retirement accounts last year? Probably not. Here's how to make up for that and save better in 2014.
First, which account to bulk up: your 401(k) or Roth IRA? Contribution limits didn't change this year for Roth IRAs, 401(k)s, 403(b)s for employees of public schools and certain tax-exempt organizations or for savings incentive match plan for employees' IRAs for employers and the self-employed.
The limit did change for simplified employment pension IRAs, for which employers can take tax deductions for discretionary contributions.
Here's the breakdown by account type:
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Hitting Roth maximums. If you contribute monthly to your Roth IRA and want to hit the $5,500 max ($6,500 if you're 50 or older), start the year by kicking in $458.33 each time ($542 if 50 or older) or round to $450 a month and throw in an extra $100 sometime during the year.
To contribute to your Roth with each paycheck and aim for the max, the amount comes to $229.16 if you're paid twice a month or $211.53 if paid every other week. Again, you end up a few cents from the max, so adjust your last contribution of the year to make up the difference.
If you're a high-income earner with a workplace retirement plan, verify that you qualify to contribute after recent changes to the phase-out range recent changes to the phase-out range. If your job offers a plan, your tax deduction for traditional IRA contributions phases out if your modified adjusted gross income or how much you make before subtracting deductions falls between $60,000 and $70,000 ($96,000 to $116,000 for couples).
If only one spouse has a retirement plan at a workplace, the deduction phases out once the couple's income reaches $181,000 to $191,000.
Topping off 401(k) and 403(b) plans. You likely contribute a percentage of your salary to 401(k)s or 403(b)s. If you want to reach the maximum contribution of $17,500 by 2014's end, best to contribute a specific dollar amount per paycheck.
If you are paid twice a month (24 paychecks per year), contribute $729.17 per paycheck to hit the max, $673.08 per paycheck if paid every other week (26 paychecks per year). If you're paid monthly, contribute $1,458.33 per check.
Reaching SIMPLE and SEP IRA maximums. If you're paid twice a month, contribute $500 per paycheck to hit the max of $12,000 for a SIMPLE IRA, $461.54 if paid every other week and $1,000 per check if you're paid monthly.
SEP-IRAs' maximum contribution increased by $1,000 per year, to 25% of your compensation up to $52,000. Because of this limitation, if you make more than $260,000 the most you can contribute is $52,000.
In general with retirement plans, find out if you qualify for a company match on your workplace plan and contribute at least enough to get the match. If you already do that, increase contributions by a single-digit percentage and set a calendar reminder to increase them again in six months.
If you keep putting off starting a Roth IRA, take an hour to research low-cost brokerage firms and set up an account.
The saver's tax credit. Depending on your income, you may also qualify for the saver's credit by contributing to a retirement account. The annual qualifying income levels in 2014 by filing status:
- Married filing jointly: Less than $60,000.
- Head of household: Less than $45,000.
- Single: Less than $30,000.
Start saving for retirement now. No better time than the present.
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-- Sophia Bera, CFP, a fee-only financial planner that caters to investors in their 20s and 30s. She has been in the financial planning industry since 2007 and is the founder of Gen Y Planning in New Berlin, Ill. He is an adjunct professor teaching courses in math, finance, insurance and investments. His blog is Getting Your Financial Ducks in a Row, in Minneapolis. She works with clients throughout the U.S. She has been quoted on various websites and publications including Forbes, Business Insider, AOL, Yahoo, Money Magazine, The Fiscal Times, Fox Business and The Huffington Post. Money Under 30 recently named her one of the "Top Financial Advisors for Millennials."