Retirement plan contribution limits for 2015 have increased so you can make bigger deposits into tax-deferred savings plans. Also, if you’ve just turned 50, your ability to catch up on retirement savings has increased. In short: you can save more than you could before.
The good news: you can add another $500 to your 401(k) contributions. If you’re 50 years old, you can add another $500 to your savings contributions. Phase out thresholds have changed, too—you can make another grand, and save it.
Tax-deferred savings is truly one of the only benefits afforded to us by Congress, and I say: MAXIMIZE IT.
SAVE MORE, MAKE MORE
The new rules, as of Thursday, include the following:
• You may now put $18,000 (up from $17,500) into 401(k), 403(b) and most 457 plans, as well as the federal government’s Thrift Savings Plan.
• If you are age 50 and older, you can make “catch-up” contributions of $6,000 annually, increased from $5,500, into these plans.
• The phase out range on deductions for singles and heads of household who are contributing to traditional IRAs and are already covered by employer-sponsored retirement plans has changed: The phase outs affect you if your MAGI (Modified Adjusted Gross Income) is between $61,000 and $71,000 (up from $60,000 to $70,000 last year).
• The phase out thresholds also have increased for married taxpayers with one or the other spouse contributing to IRAs, while also contributing to workplace retirement plans (The full list of rule changes is on the IRS website).
• For Roth IRAs, income phase-out ranges have increased from between $116,000 and $131,000 for individuals and $183,000 to $193,000 for married couples; however, the Roth IRA contribution limits ($5,500 maximum) seem to be staying put.
One IRA Rollover Rule
Beginning in January of 2015, you may not make more than one rollover from an existing IRA within one year.
For example, imagine that you have two IRAs: IRA 1 and IRA 2, and you make a tax-free rollover of 50% of the balance of IRA 1 into a new IRA 3.
Within one year of the distribution from IRA 1, you cannot make another tax-free rollover from IRA 1 or from IRA 3 into another IRA.
However, you could roll funds out of IRA 2 into any other IRA, because you did not roll money into or out of that account within the previous year.
My experience is that, for the most part, when people rollover an IRA, they rollover the entire balance, and now Congress seems to be saying that’s a good idea.
Saver’s credits designed to help low income families are also likely to help high net worth families, too.
The credit applies to married taxpayers filing jointly who have income up to $61,000 (increased from $60,000 this year); different levels are set for single taxpayers and those married but filing separately. For those who contribute $5k to their IRA, there is a tax credit on top of the tax deferred savings.
Entrepreneurs benefit from this credit—they often have everything—time, money, assets, tied up in making their business take off. High net worth taxpayers can benefit, too—especially in years where there are lower earnings due to entrepreneurial efforts.
For more information on all of these update and more, refer to the IRS website directly by clicking here.