401(k) and other Pension Plan Contribution Limits Increase in 2015

nest eggBy: W. Devin Wolf, CFP®

It’s official: the IRS has announced the cost-of-living adjustments affecting 401(k) contribution limits for the 2015 tax year.  Here’s a breakdown of the new changes, and how they might affect your ability to contribute to your retirement fund.

Elective deferral and SIMPLE IRA Contribution Limits

These limits apply to individuals seeking to contribute to a retirement plan sponsored by their employer. Tax year 2015 shows these figures up across the board, reflecting an overall increase in cost-of-living.

  • Elective deferral (contribution) limits increased from $17,500 to $18,000 for employees contributing to 401(k), 403(b), most 457, and the federal government’s TSP (Thrift Savings Plan).
    • Catch up contributions for employees age 50 and older in these plans increased from $5,500 to $6,000.
  • SIMPLE IRA contribution limits increased from $12,000 to $12,500.
    • Catch up contributions for SIMPLE IRA participants age 50 and over increased from $2,500 to $3,000.

Traditional IRA and ROTH IRA Contribution Limits

For tax year 2015, traditional IRA and ROTH IRA contribution and catch up limits remain unchanged, at $5,500 and $1,000 respectively. However, the adjusted gross income (AGI) phase-out ranges, or the income ranges during which an individual’s deduction is gradually reduced, have increased for 2015. See below:

IRA deduction AGI phase-out range for active participants:

Single: $61,000 – $71,000

Married Filing Jointly: $98,000 – $118,000

Spousal IRA: $183,000 – $193,000

ROTH IRA AGI phase-out range for contribution eligibility:

Single: $116,000 – $131,000

Married Filing Jointly: $181,000 – $191,000

For additional information visit the IRS website here http://www.irs.gov/uac/Newsroom/IRS-Announces-2015-Pension-Plan-Limitations;-Taxpayers-May-Contribute-up-to-$18,000-to-their-401(k)-plans-in-2015

In January, Numbers Unlimited will also be updated to include the most recent tax updates.