IRA and 401k Contribution Limits for 2016
Eligible Workers Can Contribute More to 401k and IRA Retirement Plans
Good news: the federal limits on IRA and 401k contributions are increasing.
As of 2016, eligible people under age 50 can contribute $18,000 to 401k plans and $5,500 to IRA plans.
People who are 50 or older can contribute an additional $6,000, for a total of $24,000.
(Read More: 4 Retirement Tips for People 40 and Older)
Individual Retirement Account contribution limits are $5,500 per year across a combination of Traditional and Roth accounts. The catch-up contribution limit remains unchanged at an extra $1,000 per year for eligible participants 50 and older.
(Read More: How Much Do I Need for Retirement?)
Previously, single people and heads of households could only contribute to a Roth IRA if they earned up to $127,000. The tax benefit phased out once their income surpassed $112,000. Couples could only contribute if their income was below $188,000. Their tax benefit phased out once their income surpassed $178,000.
Those limits are now raised. Singles and household heads can earn up to $132,000, and the phase-out doesn’t begin until their income surpasses $117,000. Couples can earn up to $194,000 and retain their eligibility, with the tax benefits phasing out once they earn more than $184,000.
Previously, single and head of household workers who had an employer retirement plan and also made traditional IRA contributions had their tax deductions phase out if they had a modified adjusted gross income between $59,000 and $69,000. That range is now up to $61,000 to $71,000.
For married couples in which the spouse with the workplace plan is the same person making the contribution, the phase-out is $98,000 to $118,000. This is an increase over the previous phase-out of $95,000 to $115,000.
For couples in which the spouse who isn't covered by a workplace plan is making the contribution, the phase-out range is $184,000 to $194,000. This is an increase over the prior phase-out range of $178,000 to $188,000.
Saver’s Income Credit Limits
Single people earning up to $30,750 can claim the retirement saver’s tax credit. That’s an increase over the prior income limit of $30,500. Heads of households are eligible for the retirement saver’s tax credit if they earn $46,125, a jump over the prior income limit of $45,750. Couples filing jointly can claim the retirement saver’s tax credit if they earn up to a combined $61,500, an increase over the previous limit of $61,000.