Know Your Retirement Plan Numbers for 2015

February
02

Written by: Jon McGraw

saving We’re already one month into 2015—how time flies! When a new year begins, many people resolve to be savvier with their money, whether that means making sure they’re getting all the tax deductions to which they’re entitled, finally thinking about succession planning for their business, or reviewing those old insurance policies they haven’t looked at in years. One other item to add to that to-do list? Double-checking your retirement saving strategy and making sure that you are contributing as much as you can to these accounts.

2015 Contribution Limits

Contribution limits for several types of retirement plans have increased in 2015. This year, you can contribute the following amounts to various retirement accounts (subject to income limits and other rules):

  • Traditional and Roth IRA: $5,500 per year, plus a $1,000 catch-up contribution for those over age 50 (this is the same as 2014)
  • 401(k), 403(b), 457 or Thrift Savings Plan: $18,000 per year, plus a $6,000 catch-up contribution for those over age 50
  • Solo 401(k): $53,000 per year, plus a $6,000 catch-up contribution for those over age 50
  • Simplified Employee Pension (SEP): $53,000 per year or 25% of self-employment compensation, whichever is less
  • SIMPLE IRA: $12,500 in employee contributions, plus a $3,000 catch-up contribution for those over age 50
  • Employers can contribute up to $53,000 or 25% of an employee’s salary (whichever is less) to a profit-sharing plan in 2015 (this number includes all employee contributions as well)

If your income exceeds certain limits, you may lose the ability to participate in certain types of retirement savings plans, or you may lose the ability to deduct your contributions to those accounts.

  • You are no longer able to contribute to a Roth IRA if your adjusted gross income (AGI) exceeds $193,000 if you are married filing jointly or $131,000 if you are single. You can only make partial contributions to a Roth IRA if your AGI exceeds $116,000 if single or $183,000 if married.
  • If you have a retirement plan at work, you lose the ability the ability to deduct traditional IRA contributions when your AGI exceeds $118,000 (married filing jointly) or $71,000 (single filers). Deductions begin to phase out gradually at $61,000 in AGI for single filers and $98,000 in AGI for married couples.
  • If you (and your spouse, if married) aren’t covered by a retirement plan at work, you can deduct the full amount of your IRA contributions, no matter what your income. If you aren’t covered by a retirement plan but your spouse is, you can deduct contributions if your AGI is less than $193,000 (deductions begin to phase out at $183,000 in AGI).

There’s Still Time to Make 2014 Contributions

While you’re reviewing your scheduled contributions for 2015, don’t forget to double-check your contributions for 2014. You have under April 15, 2015, to make contributions to a traditional, Roth or SEP IRA for the 2014 tax year. If you under-contributed or forgot that you were eligible for a catch-up contribution, now’s the time to fix that. Keep in mind that the April 15 deadline is inflexible—even if you file for an extension, you must still make your IRA contributions by that date.

If you discover that you mistakenly made excess contributions to a traditional, Roth or SEP IRA, you still have time to fix that error too. You have until your tax filing deadline (for most of us, that’s April 15, 2015, unless you file an extension) to withdraw the excess contributions and earnings without penalty.

If you’d like to learn more about how Buttonwood Financial Group can help you make the most of the different retirement savings options available to you, please get in touch.