Inflation in 2015 was too tame to trigger the cost-of-living adjustments that nudge pension plan limitations upward. Here are some figures to help plan 2016.
Employees May Contribute up to $18,000 to their 401(k) plans in 2016
The contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan remains unchanged at $18,000.
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $6,000.
Employees May Contribute up to $12,500 to their SIMPLE retirement account
SIMPLE account contribution limits for 2016 are unchanged at $12,500. The additional "catch-up" contribution for people age 50 and over also remains unchanged at $3,000. The largest total SIMPLE contribution possible in 2016 is $15,500.
SEP (Simplified Employee Pension) plans are still limited to 25% of compensation (or self-employment earnings).
The maximum amount small business owners and the self-employed may contribute to a SEP or other defined contribution plan remains $53,000 in 2016.
Annual IRA contribution limits remain unchanged at $5,500 ($6,500 for individuals 50 or above)
Individuals who have earned income may make deductible contributions to a traditional IRA up to $5,500 or that year's compensation from wages or self-employment, whichever number is lower. The contribution limit is $6,500 for taxpayers age 50 or above. You can make deductible contributions to your IRA up to April 18, 2016 this year's tax filing deadline.
The deduction for taxpayers contributing to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000. These thresholds are unchanged from 2015. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range remains unchanged at $98,000 to $118,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Individuals who exceed these phase out thresholds may still contribute to their IRA but will be unable to deduct the contributions.
Roth IRA income limits increase slightly in 2016
Like traditional IRAs, Roth IRA contributions are limited to $5,500/$6,500. Contributors must have earned income at least equal to their contribution amount. But Roth contributions are not deductible and Roth distributions are not taxed.
Roth IRAs also have an income test for eligibility, unlike traditional IRAs. Individuals with adjusted gross income above certain levels may not contribute to a Roth. The AGI phase-out range for taxpayers making contributions to a Roth IRA in 2016 is $184,000 to $194,000 for married couples filing jointly, up from $183,000 to $193,000 in 2015. For singles and heads of household, the income phase-out range is $117,000 to $132,000, up from $116,000 to $131,000.
Taxpayers in these ranges will have their maximum Roth contribution amounts "phased out" with the amount at the lower end close to the max and the amount at the upper end near zero.
Employees May Contribute up to $18,000 to their 401(k) plans in 2016
The contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan remains unchanged at $18,000.
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $6,000.
Employees May Contribute up to $12,500 to their SIMPLE retirement account
SIMPLE account contribution limits for 2016 are unchanged at $12,500. The additional "catch-up" contribution for people age 50 and over also remains unchanged at $3,000. The largest total SIMPLE contribution possible in 2016 is $15,500.
SEP (Simplified Employee Pension) plans are still limited to 25% of compensation (or self-employment earnings).
The maximum amount small business owners and the self-employed may contribute to a SEP or other defined contribution plan remains $53,000 in 2016.
Annual IRA contribution limits remain unchanged at $5,500 ($6,500 for individuals 50 or above)
Individuals who have earned income may make deductible contributions to a traditional IRA up to $5,500 or that year's compensation from wages or self-employment, whichever number is lower. The contribution limit is $6,500 for taxpayers age 50 or above. You can make deductible contributions to your IRA up to April 18, 2016 this year's tax filing deadline.
The deduction for taxpayers contributing to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000. These thresholds are unchanged from 2015. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range remains unchanged at $98,000 to $118,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Individuals who exceed these phase out thresholds may still contribute to their IRA but will be unable to deduct the contributions.
Roth IRA income limits increase slightly in 2016
Like traditional IRAs, Roth IRA contributions are limited to $5,500/$6,500. Contributors must have earned income at least equal to their contribution amount. But Roth contributions are not deductible and Roth distributions are not taxed.
Roth IRAs also have an income test for eligibility, unlike traditional IRAs. Individuals with adjusted gross income above certain levels may not contribute to a Roth. The AGI phase-out range for taxpayers making contributions to a Roth IRA in 2016 is $184,000 to $194,000 for married couples filing jointly, up from $183,000 to $193,000 in 2015. For singles and heads of household, the income phase-out range is $117,000 to $132,000, up from $116,000 to $131,000.
Taxpayers in these ranges will have their maximum Roth contribution amounts "phased out" with the amount at the lower end close to the max and the amount at the upper end near zero.
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