You can put more money in your workplace retirement plan in 2015
Eileen St. Pierre, The Everyday Financial Planner
The Internal Revenue Service (IRS) recently announced increased contribution limits in workplace retirement plans for 2015. You can contribute up to $18,000 in your 401(k), 403(b), most 457 plans, and Thrift Savings Plan (TSP). For those of you age 50 and older, your catch-up contribution has increased $500 to $6,000 – that’s $24,000 a year, folks. Contribution limits on IRAs (Traditional and Roth) stay the same – $5,500 a year plus an additional $1,000 for workers age 50 and older.
One of the most frequently asked questions during my financial counseling sessions is “Should I contribute to my retirement plan at work or use an IRA?” It is better to contribute to your retirement plan at work.
- You can contribute a lot more to your workplace plan than you can to an IRA.
- Your employer may match part of your contribution. If this is the case, you want to try to contribute enough to at least get the company match – that’s free money!
- Set up automatic withdrawals each paycheck. Just make sure you set your payments at a level you can sustain. If you find that you can still afford to save more, you can always increase your withdrawals later in the year or contribute an additional lump sum at the end of the year.
If you are covered by a workplace plan, you can still contribute to an IRA and get the tax benefits.
- For single filers in 2015, you can get the full Traditional IRA deduction if your income is less than $61,000. You will get a partial deduction for income between $61,000 and $71,000.
- For those married filing joint in 2015, you can get the full Traditional IRA deduction if your income is less than $98,000. You will get a partial deduction for income between $98,000 and $118,000.
- The income limits used to determine Roth IRA eligibility will increase by $2,000 in 2015.
In 2015, the IRS is also making it easier to qualify for the Retirement Savings Contributions Credit – better known as the Saver’s Credit.
- Single filers with incomes under $30,500 can receive up to a $1,000 tax credit (non-refundable) if they contribute to a qualified retirement plan.
- For those married filing joint with incomes less than $61,000, they can receive up to a $2,000 tax credit.
- You will need to file Form 8880.
Now is a good time to make an appointment with your Benefits department to review your retirement plan contributions. Make it one of your New Year’s resolutions to increase your contributions in 2015.