Do you know what income is used to determine whether you’ve surpassed the Annual Earnings Test? At least one item may surprise you…
Annual limits
Important Tax Numbers for 2015
For 2015 the IRS has given the new limits regarding retirement contributions as well as estate and gift tax exemptions. Regarding retirement contributions employees may now defer $18,000 annually to their employer sponsored plan including a 401k, 403b, and 457 plans. This is an increase from last year’s $17,500 amount. Additionally, employees age 50 or older can now make an age based catch-up contribution of $6,000 which is a $500 increase from last year’s $5,500 amount.
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Retirement Plan Contribution Limits for 2014
The IRS recently published the new contribution limits for various retirement plans for 2014. 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 virtually no increases for most all contribution amounts, but as usual the income limits increased for most types of account. IRAs The annual contribution limit for IRAs (both traditional and Roth) remains at $5,500 for 2014. The “catch up” contribution amount, for folks age 50 or over, also remains at $1,000. The income limits for traditional (deductible) IRAs increased slightly from last year: for singles covered by a retirement plan, your Adjusted Gross Income (AGI) must be less than $60,000 for a full deduction; phased deduction is allowed up to an AGI of $70,000. This is an increase of $1,000 over the limits for last year. For […]
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3 things you can do if you’ve filed for Social Security benefits too early
I often hear from people who, for whatever reason, decided to file for their Social Security retirement benefit immediately upon reaching 62 (or 66, or whatever age), and now they have found out that this wasn’t necessarily the best option for them to maximize their lifetime Social Security benefits. There are several things that you can do about this – three that come to mind at the moment. Below we’ll work through each of these ways to fix a situation where you filed too soon. Pay it back If it’s been less than 12 months since you filed, it’s possible for you to withdraw your application for benefits and pay back all that you’ve received to date. Once you’ve done this, as far as Social Security is concerned, you never filed. All of your benefit options are intact, just as if you hadn’t filed in the first place. If your […]
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A Few Facts to Know About Retirement Plan Contributions
As we near the tax filing deadline, there are a few things you need to be aware of as you consider your retirement plan contributions for tax year 2012 (or whatever the prior tax year is, if you’re reading this sometime later). Regular IRA contributions are due by the filing deadline, with no extensions. That means April 15, 2013 for the 2012 tax year. Your contribution for 2012 is considered made “on time” if your payment is postmarked by midnight on April 15, 2013. Perhaps you wish to make a more substantial contribution to a retirement plan – in 2012, you can contribute up to $50,000 to a Keogh plan. That amount is limited to 20% of the net self-employment income, or 25% of wage income if the individual is an employee of the business. Keogh plan contributions can be made by the extended due date of your return – […]
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Retirement Plan Contribution Limits for 2013
The IRS recently published the new contribution limits for various retirement plans for 2013. 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 across-the-board increases for most all contribution amounts, and as usual the income limits increased as well. This provides increased opportunity for savings via these tax-preferred vehicles. IRAs The annual contribution limit for IRAs (both traditional and Roth) increased from $5,000 in 2012 to $5,500 in 2013. The “catch up” amount, for folks age 50 or over, remains at $1,000. The income limits for traditional (deductible) IRAs increased slightly from last year: for singles covered by a retirement plan, your Adjusted Gross Income (AGI) must be less than $59,000 for a full deduction; phased deduction is allowed up to an AGI of $69,000. This is an increase of […]
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The 403(b) and 457(b): A One-Two Punch for Retirement
Many non-profits, public schools, universities, state governments have access to either a 403(b) or a 457(b) retirement plan. Both the 403(b) and the 457(b) are retirement plans that these institutions can offer employees in addition to or in lieu of a defined-benefit pension. For ease of simplicity, think of these plans as a 401(k), but for non-profits. We won’t get into the minutia of exactly how they’re different here. Like their 401(k) counterpart, the 403(b) and the 457(b) allow their owners to defer from their salaries up to $17,000 annually, on a pre-tax, tax-deferred basis. For those aged 50 and over, the IRS allows an additional $5,500 age-based catch-up contribution. These numbers are for 2012, they are indexed annually for inflation. There is a select group of people that may have access to both the 403(b) and the 457(b). For these chosen few, there is an opportunity to save even […]
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IRS Cracking Down on IRA Rules
It seems that some of the rules the IRS has put in place with regard to IRAs have not always been watched very closely – and the IRS is stepping up efforts to resolve some of this. According to the article in the WSJ, IRA Rules Get Trickier, an estimated $286 million in penalties and fees were uncollected for 2006 and 2007 tax years’ missed distributions, over-contributions, and the like. The title of the article is a bit misleading, because the rules are not changing or getting “trickier”, the IRS is just going to be paying closer attention to what you’re doing with your account. This is set to begin by the end of this year, after the IRS delivers their report to the Treasury on how to go about enforcing the rules more closely. The first rule being monitored more closely is the contribution rule – for 2012, you’re […]
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What If My Employer Doesn’t Match My 401(k) Contributions?
Should I continue to make contributions to my 401(k)? Is there something else that I should make contributions to instead? As you may recall, the recommended order for retirement savings contributions is normally as follows: 401(k) contributions up to the amount that the company matches max out your Roth or traditional IRA contributions for the year (as applicable) max out the remainder of the available 401(k) contributions make taxable investment contributions In the situation where your employer doesn’t match your contributions to a 401(k) plan, the order of contributions is more appropriate if you bump up the Roth or traditional IRA contributions. In other words, just eliminate the first bulletpoint. Now, the choice of Roth IRA versus the traditional IRA for your contributions is dependent upon your income and the tax impacts. For example, you would not be eligible to make a deductible traditional IRA contribution if your Modified Adjusted […]
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2012 Bend Points for Social Security Retirement
Image via Wikipedia For those of you who aren’t quite up to snuff on the carnage that makes up the Social Security retirement benefit calculation, there are a couple of figures that are important to the calculation process called Bend Points. Bend Points are the portions of your average income (Average Indexed Monthly Earnings – AIME) in specific dollar amounts that are indexed each year, based upon an obscure table called the Average Wage Index (AWI) Series. They’re called bend points because they represent points on a graph of your AIME in calculating the PIA, and they actually bend. If you’re interested in how Bend Points are used, you can see the article on Primary Insurance Amount, or PIA. Here, however, we’ll go over how Bend Points are calculated for each year. To understand this calculation, you need to go back to 1979, the year of the Three Mile Island […]
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Social Security Benefit Increase for 2012
For the first time in two years, Social Security benefits will increase in January 2012. The increase in benefits is set at 3.6%. The 3.6 percent cost-of-living adjustment (COLA) will begin with benefits that nearly 55 million Social Security beneficiaries receive in January 2012. Increased payments to more than 8 million SSI beneficiaries will begin on December 30, 2011. Some other changes that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $110,100 from $106,800. Of the estimated 161 million workers who will pay Social Security taxes in 2012, about 10 million will pay higher taxes as a result of the increase in the taxable maximum.
Sterling Raskie, MSFS, CFP®, ChFC®
The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was published in January 2020 and is available on 
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And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.