The IRS is giving holders of IRA accounts a chance to catch up by increasing the 2013 IRA contribution limits on tax-deferred and tax-free accounts. The increased contribution limit for both Traditional and Roth IRAs is the first increase since 2008, and it comes at an ideal time for workers concerned about potentially higher payroll taxes. Coupled with the higher contribution limit is an increased cap on adjusted growth income for eligibility to invest in a Roth IRA, meaning that more Americans will be able to take advantage of the potential benefits of a Roth. The 2013 IRA contribution limits have increased from $5,000 per year to $5,500 per year for both Traditional and Roth IRA accounts. (The additional catch up contributions for individuals aged 50 or older will not change.) The IRS reportedly made the change to keep up with inflation.

Another change that will benefit retirement investors is that the income ceiling has been raised for Roth IRA accounts. The maximum adjusted growth income for married couples will go from $183,000 to $188,000 and the limit will increase from $125,000 to $127,000 for single taxpayers. Lower income earners may also benefit from the new IRS retirement investment changes; the maximum income to claim the saver’s tax credit will increase to $59,000 for married couples, $29,500 for singles, and $44,250 for heads of households (all figures are modified adjusted gross income). The saver’s credit can be up to $2,000 for married taxpayers and $1,000 for singles.

What do all of these IRS changes mean for taxpayers? It may be a prime opportunity to rebuild accounts that were battered during the economic downturn. It may also provide a spark for those who have not yet begun to save for retirement or who have not been investing regularly into their IRA. We recommend that those affected by the increased income levels for opening Roth IRA accounts or claiming the saver’s credit speak with their financial advisers to see how these changes may benefit their retirement accounts and taxes.