Empirical Blog

 

Retirement Planning – 2015 Annual Limits

The year 2015 has arrived and with it, new annual limits on retirement plan contributions, phase-outs, and exclusions.

Retirement Plan Contributions

How much are you saving in your 401(k) plan? If you maxed out your contributions last year or plan to max them out this year, you should consider talking to your 401(k) plan provider about increasing your contributions. The new limit for 401(k) contributions is $18,000 this year and if you are age 50 or older, you can contribute an additional $6,000, taking the total contributions up to $24,0001.

Tax prep

If the annual savings were broken down for someone younger than 50, the monthly contribution needed to max out the plan this year is $1,500. If you are not to this point, consider saving an extra $50 or $100 each month to see if you notice it is gone. If you don’t notice it, consider doing it again. You might be surprised how easy it is to pay yourself first, since 401(k) contributions are deducted from your paycheck before you receive the money.

Other notable annual limits you should be aware of regarding contributions include: SIMPLE plans, defined benefit plans, and IRA or Roth IRAs. See the table below for a quick summary.

Retirement Plan Contribution Limit Catch Up Contribution
SIMPLE $12,500 $3,000
Defined Benefit Plan $210,000 N/A
IRA or Roth IRA $5,500 $1,000

Phase-outs

If you are considering contributing to a Roth IRA this year, your ability to contribute phases out between $116,000 and $131,000 if you are single and $183,000 and $193,000 if you are married filing jointly.

One question I receive frequently is whether someone can make a deductible IRA contribution. If you are an active participant, such as someone contributing to a 401(k) plan, your ability to contribute phases out between $61,000 and $71,000 if you are single and $98,000 and $118,000 if you are married filing jointly. Although you may be ineligible to deduct the contribution, you can still make a non-deductible contribution and have it grow tax-deferred.

For those of you worried about your Medicare Part B premium rates, the chart below shows the premium based on your income:

Premium Annual Income – Single Annual Income – Married Filing Jointly
$104.90 <$85,000 <$170,000
$146.90 $85,001 – $107,000 $170,000 – $214,000
$209.80 $107,001 – $160,000 $214,001 – $320,000
$272.70 $160,001 – $214,000 $320,001 – $428,000
$335.70 >$214,000 >$428,000

Exclusions

If you wish to give money to another individual this year, you can give $14,000 free of tax. The estate tax and gift tax exclusion each have increased to $5,430,000 this year, meaning you can give away this amount over your lifetime without paying federal taxes.

If you have questions about your retirement plan contributions, phase-outs, or exclusions, please give your Empirical Advisor a call.

 

References
1. Annual limit data was taken from the following source: Sam Van Why, MA, CLU, ChFC and Michael B. Cates, Ms, CFP®.  ”2015 Annual Limits Relating to Financial Planning”. CFFPinfo.com. College for Financial Planning®.

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About Shan Zubair

As a financial advisor, Shan works closely with his clients to help define and commit to their retirement and investment objectives. Shan is a Certified Financial Planner™ and Chartered Mutual Fund Counselor (CMFC®).

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