Ah, it’s just not a good week unless we have a healthy article from Mr. Money Mustache taking on another ridiculous article stating how impossible it is for a middle class family to retire. You should head over to read the original article, wherein the author states that a family with a $150,000 income would take 110 years of work to retire; or the reply from the ‘Stashe about how absurd the tone of the article is and how it draws a populist CEOs-get-paid-too-much-and-that’s-the-problem conclusion.
How many of you managed to catch the State of The Union address last night? I happened to catch the last 30 minutes or so of the speech and my ears perked up at President Obama’s mention of a “myRA”. He intends to issue an executive order to create a new retirement account vehicle for people to use. The speech was light on details, and unfortunately so was the press briefing/details issued at the time. Thankfully the White House gave more details today. So what is a myRA?
The IRS released the new IRA contribution limits for 2014 and they will remain the same as 2013: $5,500 for those under 50, and an additional $1,000 “catch-up” for those over 50. This isn’t too surprising given the low inflation rate this year (as the base contribution limit is inflation adjusted at $500 increments, though the “catch-up” number is not).
The IRS has released the new figures for 401k contribution limits in 2014 and they will remain the same as 2013: $17,500 for those under 50, and an additional $5,500 “catch-up” for those over 50. These limits apply to 403b, most 457, and government Thrift Savings Plans as well. This isn’t too surprising given the low inflation rate this year (as these amounts are inflation adjusted at $500 increments).
A 401k is a tax-advantaged retirement account sponsored by an employer. The tax implications differ based on whether the 401k plan is a “traditional” plan or a “Roth 401k”. When not otherwise stated, most people refer to traditional 401ks as simply a “401k”, as Roth 401ks are newer and less common.
A traditional 401k allows an employee to save for their retirement using pre-tax money – thereby reducing their taxable income in addition to putting money aside for retirement. The money is taxed when withdrawals are made from the account. Using this type of plan, you are deferring your taxes until retirement.