The Internal Revenue Service (IRS) provided some welcome news recently regarding the amount of money that investors can save toward retirement. Changes to income level thresholds were also announced, which could mean that more individuals might now qualify to make tax-deductible contributions.
Employer Sponsored Plan Changes
For those individuals who have access to employer sponsored retirement plans, contributions limits were increased by $500. For 401(k), 403(b), and most 457 plans, limits were increased to $18,000 for 2015. The allowable catch-up contribution for employees age 50 or older also increased to $6,000. For SIMPLE 401(k) or SIMPLE IRA accounts, limits rose to $12,500, along with catch-up contributions that increased to $3,000.
| Plan Limits for Year |
2015 |
2014 |
| 401(k) Elective Deferrals | $ 18,000 |
$ 17,500 |
| 403(b) Elective Deferrals | $ 18,000 |
$ 17,500 |
| 457 Elective Deferrals | $ 18,000 |
$ 17,500 |
| 401(k), 403(b), 457 Catch-Up | $ 6,000 |
$ 5,500 |
| SIMPLE IRA/401(k) Elective Deferrals | $ 12,500 |
$ 12,000 |
| SIMPLE IRA/401(k) Catch-Up | $ 3,000 |
$ 2,500 |
*Contributions can be made up to the contribution limits or 100% of compensation, whichever is less
Total contributions into a defined contribution plan (factoring in both employee and employer contributions) cannot exceed $53,000 in 2015, an increase of $1,000 from 2014. Annual compensation that can be considered for retirement plans also rose from $260,000 to $265,000.
IRA Changes
Unfortunately for those who utilize traditional IRAs or Roth IRAs as retirement savings vehicles, contribution limits were not increased for these types of accounts. Maximum contributions will remain at $5,500 in 2015, and investors age 50 or older will still be able to make additional $1,000 catch-up contributions as well.
Although the contribution limits were not increased, the income thresholds that determine whether you can contribute and how much is tax deductible were raised.
For traditional IRAs, tax deductibility is phased out for taxpayers who have an employer sponsored plan and a modified adjusted gross income (MAGI) between $61,000 and $71,000 for individuals and $98,000 to $118,000 for couples married filing jointly. That is an increase of $1,000 and $2,000, respectively, from 2014. For individuals who aren’t eligible for an employer sponsored plan but whose spouse is, the tax deduction is phased out if the couple’s MAGI is between $183,000 and $193,000 in 2015.
For Roth IRAs, income limits were increased by $2,000. Individuals with MAGI below $116,000 can make the full contribution, while those with MAGI between $116,000 and $131,000 can contribute a reduced amount. For taxpayers who are married filing jointly, a full contribution can be made with MAGI below $183,000 with a reduced contribution for those between $183,000 and $193,000.
How can FinTrust Help you?
Make the most of your retirement savings by maximizing your contributions. Be sure to change your elective contributions with your employer or retirement plan provider in order to take these new contribution limits into account. Also, check with you tax professional to see if you may now qualify for making traditional IRA or Roth IRA contributions given the new income thresholds. Make 2015 your best savings year yet!
Jonathan E. Stano, CFP® is the Director of Financial Planning at FinTrust Investment Advisors located at the Greenville, SC office. For more information, call 864-288-2849 or e-mail jstano@fintrustadvisors.com. The information contained herein has been obtained from sources considered reliable, but its accuracy and completeness are not guaranteed. The material has been prepared for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Past performance is no guarantee of future results. Securities offered through FinTrust Brokerage Services, LLC.