The IRS has made inflation-adjustments for various retirement plans, effective January 1, 2015. These incremental cost-of living adjustments allow savers the opportunity to accelerate pre-tax contributions into 401(k), SEP-IRA or SIMPLE retirement plans. You can put away $18,000- or $24,000 if you’re 50 or older-into your 401(k), for example. These qualified contributions allow participants to enjoy substantial tax-savings for every qualified contribution made. For example an employee age 50 or older will be able to make pre-tax contributions of as much as $24,000 ($18,000 plus a $6,000 catch-up contribution) into some of the more common types of qualified retirement plans. If the participant is in the 28% federal income tax bracket, he or she will save $6,720 in federal income taxes. These contributions then can be invested and grow on a tax-deferred basis until withdrawals are made in retirement. It is also an added benefit if the participant’s employer makes a matching contribution to their account.
Here are some of the highlights of the new retirement plan limitation rules for 2015.
Employees who participate in 401(k), 403(b), most 457 plans, and federal government’s Thrift Savings Plan will have an annual contribution limit of $18,000 for 2015, up from $17,500 in 2014.
The catch-up contribution limit for employees age 50 or older in these plans is $6000 for 2015, up from $5,500 in 2014.
SEP-IRAs and Solo 401(k)s
For small business owners or the self-employed, contributions increases to $53,000 for 2015, from $52,000 in 2014. This limit is compensation based, which is now $265,000.
The SIMPLE IRA
The contribution limit on SIMPLE retirement accounts for 2015 is $12,500, up from $12,000 in 2014. Catch-up limit is $3,000, up from $2,500 in 2014.
The limit for an Individual Retirement Account remains at $5,500 for 2015, the third year in a row. Catch-up contributions also remains unchanged at $1,000 for those over 50.
Workers with an AGI (Adjusted Gross Income) of $30,500 for singles or $61,000 for married couples in 2015 are eligible for a tax credit as much as $1,000 for individuals and $2,000 for married couples.
Securities offered through Cambridge Investment Research, Inc., a broker-dealer, member of FINRA/SIPC. Investment Advisor Representative through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Fountain Financial Advisors, Inc. is not affiliated with Cambridge Investment Research. This communication is strictly intended for individuals residing in the states of FL, GA. No offers may be made or accepted from any resident outside the specific states referenced.
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