retirement egg

IRS Increases Max Retirement Contribution Limits in 2015

The IRS has changed retirement account contributions and thresholds for 2015.

Retirement Contribution Limits Rising in January 2015

With the fast approaching new year, comes some good news for many from the IRS. The agency is increasing the amount  individuals can contribute to many types of retirement accounts in 2015.

retirement-nest-eggsFor employees participating in 401(k), 403(b), and most 457 plans (the Federal Government’s Thrift Savings Plan), the IRS will increase the contribution limit to $18,000 in 2015. In 2014, this limit is $17,000.

The IRS is also increasing the catch-up contribution limit for employees aged 50+, who participate in these plans. These older employees can contribute up to $6,000 into their retirement plans under the catch-up provision. This is an increase from the $5,500 for catch-up contributions in 2014.

Phase-out Thresholds for Retirement Contributions Also Increase
Some employees participating in these plans can also set-up a tax-deferred Individual Retirement Account (IRA). Under IRS regulations, only individuals below a certain income can create a traditional IRA if their employer provides a workplace retirement plan.

In 2015, individuals covered by an employer-based retirement plan and earning up to $61,000 in modified adjustable income (MAGI) can set up IRAs. In 2014, the earning limit was $60,000. For married couples (filing jointly), where the spouse making the IRA contribution also has an employer-based plan, the MAGI phase-out range will be $98,000 to $118,000 (up slightly from the 2014 range of $96,000 to $118,000)

For a joint filer not covered by a workplace plan, but the spouse is covered, the income deduction phase-out will start when the couple’s 2015 MAGI is between $183,000 and $193,000. For heads-of-households and singles, the MAGI phase-out range in 2015 is $116,000 to $131,000.

Regulations on IRA Rollovers Also Changing in 2015
If you need to rollover your IRA into another IRA, you can only do so once in a 12-month period after Dec 31, 2014. Starting in 2015, if you make a second IRA-to-IRA rollover in the same 12-month period, the IRS could recognize your IRA account as taxable income and subject it to a 10 percent penalty for early withdrawal. This regulation does not apply to trustee-to-trustee transfers. You can also continue to convert a traditional IRA to a Roth IRA without triggering early-withdrawal penalties, though you may owe taxes on the conversion.

If you want personal advice on the best retirement plans for your situation, please set up an appointment for a FREE Tax Planning Consultation.