2016 Pension and Retirement Plan Limits

Creating a healthy nest egg is vital for a comfortable retirement. Whether you’re just beginning to save or nearing the finish line, you should be aware of changes to the contribution limits for 2016. These numbers are annually adjusted to account for inflationary changes. However, because the increase in the cost-of-living index did not meet the statutory threshold that triggers an adjustment, many contribution limits will not change for next year. Below is a summary of the contribution limits for the coming year.

Those limits that will stay the same include:

  • Elective deferral contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan – $18,000
  • Employer contribution to max out a 401(k) plan – $53,000 total contribution between employee and employer
  • 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 – $6,000
  • Limit on annual contributions to an Individual Retirement Arrangement (IRA), including traditional and Roth IRAs – $5,500
  • Additional IRA catch-up contribution limit for individuals aged 50 and over – $1,000

While the IRS allows a deduction for taxpayers making contributions to a traditional IRA, the benefit is phased out for those who have modified adjusted gross incomes (AGI) within a certain range. These income phase-out ranges will remain unchanged from 2015 to 2016:

  • Singles and heads of household who are covered by a workplace retirement plan – $61,000 to $71,000
  • Married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan – $98,000 to $118,000
  • Married individual filing a separate return who is covered by a workplace retirement plan – $0 to $10,000
  • Married individual filing a separate return who makes contributions to a Roth IRA – $0 to $10,000

2016 Changes

There are some adjustments to income phase-outs for certain IRA contributors and to the AGI limits for the saver’s credit – known as the Retirement Savings Contribution Credit. If your income is modest, the saver’s credit is an amazing way to maximize your investments because Uncle Sam matches your retirement savings by refunding your taxes. A married couple filing jointly can claim the maximum ($2,000), while heads of household and singles get less – though you can’t get back more than you pay.

2016 Changes Include:

  • For an IRA contributor who is not covered by a workplace retirement plan but married to someone who is covered, the deduction is phased out if the couple’s income is between $184,000 and $194,000, up from $183,000 and $193,000
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA:
    • Married couples filing jointly – $184,000 to $194,000, up from $183,000 to $193,000
    • Singles and heads of household – $117,000 to $132,000, up from $116,000 to $131,000
  • The AGI limit for the saver’s credit:
    • Married couples filing jointly – $61,500, up from $61,000
    • Heads of household – $46,125, up from $45,750
    • Married individuals filing separately and singles – $30,750, up from $30,500

Contact Us

Putting money into a tax-advantaged retirement savings plan is one of the best ways to create a secure financial future for you and your family. If you’d like to learn more about the 2016 pension and retirement plan limits and how to take full advantage of all the options you have for retirement savings, contact JLK Rosenberger today! For additional information, call us at 818-334-8625, or click here to contact us. We look forward to speaking with you soon!

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