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.
Employer Sponsored Plans
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.
Looking to set your 2015 monthly budget?? To max out your 401(k) or 403(b) salary deferrals next year, instruct your employer to withhold $1,500 per month from your pay.
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, or $2,000 per month.
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, or $1,041.67 per month.? Anyone 50 or older by December 31st can sock away an additional $3,000 in 2015, for a total annual contribution of $15,500, or $1,291.67 per month.
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, or $4,416.67 per month, 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, or $4,916.67 per month.? You have until December 31st to set up a Solo 401k 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.
IRA?s
Don?t forget about IRAs.? Even if you?re covered under a retirement plan at work, you and your spouse can each contribute up to $5,500, or $458.33 per month, into a traditional IRA or Roth IRA next year, as long as your combined wages and net self-employment income exceeds the total amount contributed.? Anyone 50 or older can contribute an extra $1,000, increasing the total allowable contribution to $6,500, or $541.66 per month.
Even though the contribution limits didn?t increase for 2015, there is a little good news for people looking to contribute to a Roth IRA .? The amount you can earn and still contribute to a Roth has increased by $2,000 for single individuals as well as for married couples, as follows:
| Single Individuals | Married Couples | |
| Phase-out begins | $116,000 | $183,000 |
| Phase-out ends | $131,000 | $193,000 |
If your income is too high for a Roth, don?t forget that the rules changed a few years back, eliminating the income limitation as of 2010 for people looking to convert their IRAs to a Roth IRA.? This tax law change provides high-income taxpayers with a great opportunity to get money into these tax-free investment accounts.? For more information, please check out the article, The Re-Emergence of Non-Deductible IRAs, available on our March 2007 Newsletter or Keep on Converting in 2011 and Beyond, available in our March 2011 Newsletter.
And if you?re married and your spouse isn?t covered under either an employer sponsored or self-employed retirement plan during the year, the 2015 phase-out range for your spouse making a deductible IRA contribution has increased to $183,000 ? $193,000, which is identical to the Roth IRA phase-out limits.
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
Retirement Savings Option |
Under the age of 50 |
50 or older by December 31st |
401(k) or 403(b) |
$18,000 ($1,500/month) |
$24,000 ($2,000/month) |
SIMPLE IRA |
$12,500 ($1,041.67/month) |
$15,500 ($1,291.67/month) |
SEP IRA |
$53,000 ($4,416.67/month) |
$53,000 ($4,416.67/month) |
Solo 401(k) |
$53,000 ($4,416.67/month) |
$59,000 or ($4,916.67/month) |
IRA or Roth IRA |
$5,500 ($458.33/month) |
$6,500 ($541.66/month) |