Uncle Sam Wants You… to Save More for Retirement

Attorney Doug Lauenstein discusses the important factors for retirement plan limitations beginning this year.

The Treasury Department has announced inflation-adjusted figures for retirement account savings for 2015. This year there will be extra room for savings for both wage and salary types and the self-employed as well.

401(k): The annual contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan was $17,500 in 2013 and 2014. This year, the annual contribution was bumped upward to $18,000. The catch-up contribution limit for employees age 50 or older in these plans shows a corresponding increase from $5,500 to $6,000 this year. And “age 50 and older” includes those who turn 50 at any time during 2015.

SEP IRA and Solo 401(k): The amount that the self-employed or small business owner can save in a SEP IRA or a solo 401(k) went from $52,000 in 2014 to $53,000 in 2015. Additionally, the new compensation limit used for the savings calculation has increased from $260,000 to $265,000.

SIMPLE IRA: The contribution limit on SIMPLE retirement accounts has gone up from $12,000 in 2014 to $12,500 in 2015. The SIMPLE catch-up limit rises from $2,500 in 2014 to $3,000 this year.

Defined Benefit Plan: These are considered dominant pension plans for those who are high-earning and self-employed. The annual benefit of a defined benefit plan remains at $210,000 in 2015 as it did in 2014, making it one of the few limits to go unchanged.

IRA: The $5,500 limit on annual contributions to an Individual Retirement Account remains the same in 2015 as it has for the past three years. The catch-up contribution remains unchanged at $1,000. Keep in mind that the unchanged IRA amount is affected by low inflation while the catch-up contribution is not.

Deductible IRA Phase-Out: In 2014, the deduction to a contribution was $60,000-$70,000. In 2015, the deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who have modified adjusted gross incomes (AGI) between $61,000 and $71,000. For married couples who file jointly, the income phase-out range is down from $98,000-$118,000 to $96,000-$118,000 in 2015. For someone who is not covered by a workplace retirement plan but is married to someone who is, the deduction is phased out if the couple’s income if between $183,000 and $193,000. This is up from $181,000 and $191,000 in 2014.

Roth IRA Phase-Out: The phase-out range for taxpayers making contributions to a Roth IRA in 2014 was $181,000-$191,000. This year, it has increased to $183,000-$193,000.

The Saver’s Credit: For low- to moderate-income workers, the 2015 AGI limit is $61,000 for married couples filing jointly, compared to $60,000 in 2014. For heads of household, it is up to $45,750 from $45,000 and for individuals filing separately, it increases from $30,000 to $30,500.

Although there are plenty of figures noted here, it is important to understand how these new limitations can and will affect you. It is crucial to keep up with the ever-changing rules so you can take full advantage of the opportunities relevant to your financial situation. For more information regarding your retirement savings account, contact Baltimore attorney Doug Lauenstein today.