The IRS recently announced their new retirement plan contribution limits for 2015. Some have changed, some have not. Here are the highlights.
Increased 401(k) contribution limits
The maximum annual amount that can be deferred from your salary will increase from $17,500 in 2014 to $18,000 in 2015. This limit includes 401(k) plans as well as 403(b), 457 plans, and the government Thrift Savings Plan (TSP).
In addition the catch-up amount for those who will be 50 or over at any point during 2015 will increase from the current $5,500 to $6,000 in 2015. This means that those 50 and over can contribute a maximum of $24,000 during 2015 via salary deferral up from $23,000 in 2014. As a reminder, the catch-up contribution is available to you even if your regular contributions are limited due to your employer’s 401(k) plan failing it’s non-discrimination testing.
Action item: If you are able to contribute the maximum amount be sure to change your salary deferral amount before your first pay period in 2015 to ensure that your deferrals reflect these higher limits for the entire year.
SEP-IRA and Solo 401(k) contribution limits
These self-employed retirement plans are also impacted by the changes in the retirement plan contribution limits for 2015.
The salary deferral limits of $18,000 and $24,000 for those 50 and over also apply to those contributing to a Solo 401(k). In addition the maximum contribution to a Solo 401(k) increases from $52,000 to $53,000 in 2015; with an extra $6,000 available for those 50 and over bring the maximum to $59,000 for those self-employed retirement savers. This extra amount includes the profit sharing portion and is based upon your income.
The contribution limits for SEP-IRAs will also increase in 2015 from a maximum of $52,000 to a maximum of $53,000 for 2015. The actual amount that you can contribute is calculated based upon your income.
Action item: Plan your cash flow for 2015 to ensure that you can afford to contribute as much as possible. As always if you don’t have a self-employed retirement plan in place there is no better time to start one than today.
No change to IRA contribution limits
There are no changes to the IRA contribution limits for 2015 which remain at $5,500 with an extra $1,000 catch-up contribution available to those 50 and over. As always the ability to deduct your contribution to a traditional IRA is subject to income level constrains and other factors. The ability to contribute to a Roth IRA is also subject to income ceilings as well.
Action item: Check your situation to determine the best IRA contribution scenario for you.
Check out this article from the 401helpcenter.com, this one from the Joe Taxpayer, and this one from Getting Your Financial Ducks in a Row for more information on these and all of the changes in the retirement plan contribution limits for 2015.
As an investor saving for retirement you should assess how much you are saving for your retirement and if you are taking full advantage of the all of the retirement savings vehicles available to you. Even if you are not able to max out your contributions to your 401(k) or other retirement plan it is always a good idea to increase the amount you are saving each year if possible.