Changes to 2013 Retirement Benefits

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Retirement1Along with all of the tax changes we are seeing for 2013, retirement benefits also look different compared to last year. USNews summarizes, “Workers will be eligible to contribute $500 more to their retirement accounts, and get new information about the fees that are deducted from their savings. Retirees will receive slightly bigger Social Security checks and improved Medicare Part D coverage in exchange for modestly higher premiums. Social Security taxes will also increase for many workers if the payroll tax cut expires.”   Here is a look at these changes in more detail:

Increased IRA and 401(k) contribution limits: Contribution limits have increased by $500 for 401(k)s, 403(b)s, and the government’s Thrift Savings Plan, increasing from $17,000 in 2012 to $17,500 for this year. In addition, IRA contribution limits are jumping from $5,000 to $5,500. Although these normal contribution limits are increasing, catch-up contribution limits for those ages 50+ will remain unchanged: $5,500 for 401(k)s and $1,000 for IRAs.

Detailed 401(k) fee information: Due to new Labor Department regulations enacted in 2012, participants of retirement accounts will now receive quarterly and annual 401(k) statements. These new documents will list their expense ratios pertaining to each investment option, along with other fees charged to their accounts, including commissions, sales charges, recordkeeping fees, etc. These participants will also get information showing how their investment returns compare to a benchmark.

Higher Roth IRA income limits: The earnings limit for Roth IRA contributions have increased by $2,000 for this year, jumping up to $127,000 for single individuals and heads of household. According to USNews, “The modified adjusted gross income phase-out range for couples interested in making contributions to a Roth IRA will increase by $5,000 to between $178,000 to $188,000.”

Improved access to the retirement account saver’s credit: More low-income workers who use 401(k)s or IRAs to save for retirement may be eligible to claim the “saver’s credit,” a tax credit worth up to $1,000 for individuals and $2,000 for couples. The modified adjusted gross income limit for couples has increased to $59,000 this year, which is a $1,500 jump, and the income limit has increased to $29,500 for individuals and $44,250 for heads of household.

Larger pension insurance limits: The Pension Benefit Guaranty Corporation (PBGC) insures private-sector traditional pension plans up to certain annual limits. This maximum guaranteed benefit for a 65-year-old retiree increased this year from $55,840.92 to $57,477.24. The payout amount rules from the PBGC are the same as in previous years: “the maximum amount the PBGC will pay out if a pension plan fails is lower for early retirees and higher for people who delay claiming their benefits past age 65.”

Bigger Social Security Checks: Social Security payments are increasing by 1.7% for 2013. This cost-of-living adjustment means that the average Social Security check will grow by $21. Furthermore, the average benefit for couples is expected to climb from $2,014 last year, to $2,048 for this year.

Social Security has done away with paper checks: As of March 1, 2013, the U.S. Treasury will no longer be mailing Social Security checks. As a result, all benefit payments will be directly deposited into a bank or credit union account, or will be applied to a Direct Express Debit MasterCard. Retirees who do not select an electronic payment option will be automatically enrolled in the prepaid debit card.

Additional Medicare Part D Coverage: According to a Kaiser Family Foundation analysis, the average Medicare Part D premium has jumped 7% from 2012 to an estimated $40.18 per month. Similarly, the maximum possible deductible that Medicare Part D plans are allowed to charge increased by $5 to $325 this year. Juliette Cubanski, a Medicare policy analyst at the Kaiser Family Foundation, deduces, “It makes a lot of sense for people in Part D plans to take another look at the options available in their area and compare their current coverage to what else is out there.” However, seniors will also get increased drug coverage this year, due to provisions in the Affordable Care Act. Those who reach the doughnut hole gap in prescription drug coverage in 2013 will get a 52.5% discount on brand-name drugs and 21% off generic drugs, up from 50% and 14% respectively last year.

If you have any questions about retirement benefit changes for 2013, please give us a call. We are always here to help!


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