I’m sure there are very few of you who will care, but I was interested in seeing if IRA contributions will increase anytime soon. They’ve been the same ($5,000) since 2008 so it seems like it should be time for an increase. I’m sure the IRS will reveal the actual limits in the next few months, but I’m a bit impatient with all of my plans.
I’ve never been a fan of how much lower IRA contribution limits are than 401k contribution limits. I’d much rather see an overall limit across all types of accounts. Let’s say, $50k maximum per year to all retirement accounts combined. I don’t think that limits on specific types of accounts make sense, but that’s just me…and I have a play with the cards I’m dealt.
So, back to the limits. In order to determine if a cost of living adjustment is required, the Consumer Price Index 12-month average as of August 31st of the current year is divided by the CPI 12-month average of the same period in the year before the prior adjustment. Then the existing limit is multiplied by this ratio. We still have a month to go until we’ll have the final numbers, but right now the calculation comes out to $5,560. Because this is over $5,500 (and the contributions only go up in $500 increments), it appears that the 2013 IRA contribution limit will be increased to $5,500. We’ll find out for sure in the next few months.