Contributing to a retirement plan is one of the best tax shelters available to you during your working years.? Recently, the IRS announced that many of the retirement savings limits will increase for 2015.
Most working professionals have access to a 401(k) plan or a 403(b) plan at work.? Amounts contributed to these plans generally reduce your taxable earnings and always grow tax deferred.? For 2015, you can contribute up to $18,000 into a 401(k) or 403(b) plan through salary deferrals, up from $17,500 in 2014.
Catch-up contributions increased by $500 for 2015.? Anyone 50 or older by December 31, 2015 can now contribute an extra $6,000 into their 401(k) or 403(b) plan through salary deferrals next year, for a total annual contribution of $24,000.
Many smaller employers offer their staff access to SIMPLE/IRAs instead.? SIMPLE’s work just like 401(k) plans, which means it’s up to you to fund the bulk of this retirement savings account through salary deferrals.? For 2015, the maximum contribution into your SIMPLE increases by $500 to $12,500. ?Anyone 50 or older by December 31st can sock away an additional $3,000 in 2015, for a total annual contribution of $15,500.
Are you self-employed?? Each year, you can contribute up to 20% of your net self-employment income into a SEP IRA.? The maximum contribution for 2015 is $53,000, up from $52,000 in 2014.
Solo 401(k)’s are an attractive alternative to many sole proprietors and business owners with no full time employees who work more than 1,000 hours per year besides a spouse.? If you don’t have access to a 401(k) or 403(b) plan through another employer, the Solo 401(k) plan makes it easier for you to hit next year’s max of $53,000.? If you’re 50 or older, your maximum contribution into a Solo 401(k) jumps to $59,000.? You have until December 31st to set up a Solo 401k and contribute for 2014.
The IRS also announced that the maximum amount of wages and net self-employment income that you can use to determine certain retirement plan contributions has increased to $265,000 for 2015, up from $260,000?in 2014.
Re-Set Your 2015 Budget
Most people won’t be able to max out these tax-advantaged retirement options unless they get on a budget and put away a set amount of money each month.? With 2014 winding down, now’s the time to start thinking about resetting your monthly retirement savings goals for 2015.
2015 Maximum Retirement Account Contributions
Under the Age of 50:
|401(k) or 403(b)||$18,000
|IRA or Roth IRA||$5,500
50 or Older by Dec. 31st:
|401(k) or 403(b)||$24,000
|Solo 401(k)||$59,000 or
|IRA or Roth IRA||$6,500