2013 IRA Contribution revisions and difference between traditional and Roth IRAs


Good news! The amount you can contribute to an Individual Retirement Account has increased for the year 2013. The contribution limit, the maximum dollar amount you can put into a tax-favored retirement plan each year, is now $5,500, an increase of $500 over 2012’s limit of $5,000.642-436


Those aged 50 and older can contribute an additional $1,000, making their limit $6,500 this year. This additional contribution amount, called a catch-up contribution, allows you to set aside a little bit of extra money in the years before retirement, and hopefully increase your tax-deferred investment earnings. Whether you are a diligent retirement saver or truly are behind and in need of catching-up, you should take advantage of catch-up contributions’ extended limits.

Why should you take advantage of IRA contributions? For one thing, they can lower your taxable income. Contributions to a Traditional IRA can be fully or partially income tax deductible, depending on your circumstances. Here’s how it works: If you don’t have a workplace retirement plan, such as a 401K, you can deduct contributions in full from your federal income taxes; If you have a 401K or other workplace retirement plan, you may be able to deduct a portion depending on your income. For complete details, click here to go to the IRS page on IRA tax deduction limits.

The contribution limits are the same for Roth IRAs. Contributions to a Roth IRA (which are slightly different than Traditional IRAs) are not tax deductible. However when you take distributions at retirement, you do not pay income tax at that time.642-437

Which IRA Type is best for you?

Traditional IRA

Roth IRA


Tax deductible depending on 401k availability and income level

Contributions are not tax deductible

2013 Contribution Limits



2013 Contribution Limit – *if aged 50 and over




Taxes are deferred until funds are withdrawn

Earnings may be Tax exempt


Without IRS penalty at age 59 ½ ; before 59 ½ there is a 10% penalty

Without IRS penalty at age 59 ½ ; before 59 ½ there is a 10% IRS penalty

Mandatory Distribution Age

70 ½


To learn about the retirement vehicles and rates Standard Bank offers, click here. To contact a financial adviser call 866.499.2265

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