The IRS recently published the new contribution limits for various retirement plans for 2016. These limits are indexed to inflation, and as such sometimes they do not increase much year over year, and sometimes they don’t increase at all. This year we saw a few increases for some contribution amounts, and the income limits increased for most types of accounts after virtually no changes to the contribution amounts in 2015.
IRAs
The income limits for traditional (deductible) IRAs increased slightly from last year: for singles covered by a retirement plan, your Modified Adjusted Gross Income (MAGI) must be less than $61,000 for a full deduction; phased deduction is allowed up to a MAGI of $71,000. This is the same as the limits for 2015. For married folks filing jointly who are covered by a retirement plan by his or her employer, the MAGI limit is increased to $98,000, phased out at $118,000, also unchanged versus last year’s limits. For married folks filing jointly who are not covered by a workplace retirement plan but are married to someone who is covered, the MAGI limit for deduction is $184,000, phased out at $194,000; this is an increase of $1,000 over 2015’s limits.
The income limits for Roth IRA contributions also increased: single folks with a MAGI less than $117,000 can make a full contribution, and this is phased out up to a MAGI of $132,000, an increase of $1,000 at each end of the range. For married folks filing jointly, the MAGI limits are $184,000 to $194,000 for Roth contributions, up by $1,000 over 2015.
401(k), 403(b), 457 and SARSEP plans
For traditional employer-based retirement plans, the amount of deferred income allowed remains the same. For 2016, employees are allowed to defer up to $18,000 with a catch up amount of $6,000 for those over age 50. If you happen to work for a governmental agency that offers a 457 plan in addition to a 401(k) or 403(b) plan, you can double up and defer as much as $36,000 plus catch-ups, for a total of $48,000 deferred.
The limits for contributions to Roth 401(k) and Roth 403(b) are the same as traditional plans – the limit is for all plans of that type in total. You are allowed to contribute up to the limit for either a Roth plan or a traditional plan, or a combination of the two.
SIMPLE
Savings Incentive Match Plans for Employees (SIMPLE) deferral limit is also unchanged at $12,500 for 2016. The catch up amount is unchanged as well at $3,000, for folks at or older than age 50.
Saver’s Credit
The income limits for receiving the Saver’s Credit for contributing to a retirement plan increased for 2016. The MAGI limit for married filing jointly increased from $61,000 to $61,500; for singles the new limit is $30,750 (up from $30,500); and for heads of household, the MAGI limit is $46,125, an increase from $45,750. The saver’s credit rewards low and moderate income taxpayers who are working hard and need more help saving for retirement. The table below provides more details on how the saver’s credit works:
| Amount of Credit | Married Filing Jointly | Head of Household | Single/Others |
|---|---|---|---|
| 50% of first $2,000 deferred | $0 to $37,000 | $0 to $27,750 | $0 to $18,500 |
| 20% of first $2,000 deferred | $37,001 to $40,000 | $27,751 to $30,000 | $18,501 to $20,000 |
| 10% of first $2,000 deferred | $40,001 to $61,500 | $30,001 to $46,125 | $20,001 to $30,750 |