Some COLA for your IRA
The IRS recently announced cost-of-living adjustments to the 2015 retirement plan contribution limitations. Although the COLA adjustments are incremental, the raised limits offer savers the chance to accelerate pre-tax contributions to many types of qualified retirement accounts.
Some of the highlights
- The elective deferral (contribution) limit for employees who participate in 401(k) plans has increased to $18,000.
- The catch-up contribution limit for employees aged 50 and over who participate in 401(k) plans increases to $6,000.
- The total annual limit for contributions made to defined contribution retirement plans increased from $52,000 to $53,000.
- The maximum compensation allowed to be used for retirement plan purposes increased from $255,000 to $260,000.
Additionally, the income phase-outs for deductible IRA contributions will be slightly increased next year. According to InvestmentNews, the deduction for taxpayers making contributions to a traditional IRA will be phased-out for single taxpayers and heads of household who are covered by a workplace retirement plan and have modified adjusted gross income (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014.
For married couples filing jointly, where one spouse who contributes to an IRA is covered by an employer sponsored retirement plan, the income phase-out range will be $98,000 to $118,000, up from $96,000 to $116,000 in 2014. For an IRA contributor who is not covered by an employer sponsored retirement plan, but is married to someone who is covered by a workplace plan, the deduction is phased-out if the couple’s income falls between $183,000 and $193,000, up from $181,000 and $191,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to a COLA adjustment and remains at $0-$10,000.
The AGI phase-out range for taxpayers making contributions to a Roth IRA will be $183,000 to $193,000 for married couples filing jointly next year, up from $181,000 to $191,000 in 2014. For singles and heads of household, the income phase-out range will be $116,000 to $131,000, up from $114,000 to $129,000. For a married taxpayer filing a separate return, the phase-out range is not subject to a COLA adjustment and remains at $0-$10,000. For a married individual filing a separate return, the phase-out range is not subject to a COLA adjustment and will remain at $0-$10,000.