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.
401k Contribution Limits
Workers can now contribute $18,000 to 401k, 403b and Thrift Savings 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.
Traditional IRA Tax Deduction Limits
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.