IRS Expands 2015 Retirement Plan Contribution Limits

October
23

Written by: Jon McGraw

The U.S. Treasury Department has announced new figures for retirement account savings for 2015, and this year there is extra room for savings for wage and salary types as well as the self-employed. If you have a 401(k), a SEP-IRA, or a SIMPLE, and if you can manage it, you might think about increasing your contributions to the new maximum. You can contribute $18,000 (or $24,000 if you’re 50 or older) into a 401(k), for example. Here are the retirement plan details:

401(k)s

The annual contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan (TSP), is $18,000 for 2015, up from $17,500 in 2013 and 2014. The catch-up contribution limit for employees age 50 or older in these plans goes up to $6,000 for 2015, up from $5,500. Even if you don’t turn 50 until Dec. 31, 2015, you can make the additional $6,000 catch-up contribution for the year.

SEP IRAs and Solo 401(k)s

For self-employed and small business owners, the amount they can save in a SEP IRA or a solo 401(k) goes up from $52,000 in 2014 to $53,000 in 2015. That is based on the amount they can contribute as an employer, as a percentage of their salary; the new compensation limit used in the savings calculation is $265,000, up from $260,000.

The SIMPLE IRA

The contribution limit on SIMPLE retirement accounts for 2015 is $12,500, up from $12,000 in 2014. The SIMPLE catch-up limit is $3,000, up from $2,500 in 2014.

Defined Benefit Plans

The limitation on the annual benefit of a defined benefit plan remains the same as 2014 at $210,000. These are powerful pension plans (an individual version of the kind that used to be more common in the corporate world before 401(k)s took over) for high-earning self-employed individuals.

IRAs

The $5,500 limit on annual contributions to an Individual Retirement Account remains the same for 2015, the third year in a row. The catch-up contribution limit also remains at $1,000.

Deductible IRA Phase-Outs

In 2015, the deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $118,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

Please note: even if you earn too much to get a deduction for contributing to an IRA, you can still contribute; it’s just non-deductible.

Roth IRA Phase-Outs

In 2015, the AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014. For singles and heads of household, the income phase-out range is $116,000 to $131,000, up from $114,000 to $129,000.

Roth IRA Conversions

If you earn too much to open a Roth IRA, you can open a nondeductible IRA and convert it to a Roth IRA as Congress lifted any income restrictions for Roth IRA conversions.

The Saver’s Credit

The 2015 AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low and moderate-income workers is $61,000 for married couples filing jointly, up from $60,000 in 2014; $45,750 for heads of household, up from $45,000; and $30,500 for married individuals filing separately and for singles, up from $30,000.

To learn more about what your specific 2015 retirement plan contribution options might be, or if you’d like to learn more about what Buttonwood’s Family CFO services could mean to you, please contact John Jespersen to set a strategy appointment at 816-285-9000 or by clicking HERE.