[1]The Internal Revenue Service recently announced cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2015. This includes an increase in the elective deferral limits for 401(k) contributions and catch up contribution limits.
Below are details on the three most significant changes that will take effect next year.
- The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.
- The 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 is increased from $5,500 to $6,000.
- The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
Contributions to your retirement account reduce taxable income at the time that you make them and you don’t pay taxes until you take the money out at retirement, so make sure to take full advantage of these increased limits in 2015.
To read the entire news release on the IRS website, click here [2].