The IRS has announced cost-of-living adjustments affecting the dollar limitations for
retirement plan contributions. Several of the limitations are higher for 2015 because
the increase in the cost-of-living index met the statutory threshold. However, some
limitations did not meet that threshold and remain unchanged from 2015.
The elective deferral (contribution) limit for employees who participate in 401(k),
403(b), and most 457 plans, and the federal government's Thrift Savings Plan,
increased from $17,500 in 2014 to $18,000 in 2015. The catch-up contribution limit
for those age 50 and over increased from $5,500 in 2014 to $6,000 in 2015.
The contribution limit for both Roth and traditional IRAs remains unchanged. You can
contribute up to $5,500 ($6,500 if you are age 50 or older by year end) to your IRA
in 2015 if certain conditions are met (i.e., sufficient earned income). For married
couples, the combined contribution limits are $11,000 ($5,500 each) and $13,000
($6,500 each if both are age 50 by year end) when a joint return is filed, provided
one or both spouses had at least that much earned income.
Keep in mind that contributions to traditional IRAs may be tax-deductible, subject to
specific limitations that increase for 2015. When you establish and contribute to a
Roth IRA, contributions are not deductible, but withdrawals are tax-free when
specific requirements are satisfied. In addition, there are no mandatory distribution
rules at age 70½ with a Roth IRA, and you can continue to make contributions
past age 70½ if you meet the earned income requirement.
The 2015 limitation for SIMPLE retirement accounts increased $500, to $12,500. The
SIMPLE catch-up contribution for those age 50 by year end also increased by $500, to
$3,000. Finally, the 2015 contribution limit for profit-sharing, SEP, and money
purchase plans is the lesser of (1) 25% of the employee's compensation - limited to
$265,000, an increase of $5,000 from 2014; or (2) $53,000, an increase of $1,000 from
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distributor are not rendering legal, accounting or other professional advice or
opinions on specific facts or matters, and, accordingly, assume no liability
whatsoever in connection with its use. The information contained in this newsletter
was not intended or written to be used and cannot be used for the purpose of (1)
avoiding tax-related penalties prescribed by the Internal Revenue Code or (2)
promoting or marketing any tax-related matter addressed herein. © 2015