Have you heard about the new tax retirement rules for 2015 that allow you to save MORE MONEY? Hip hip, hooray! Okay, so maybe I am being a little bit over excited about tax laws and retirement accounts, but hey, I do love this stuff. And candidly, you should too because every dollar you save for retirement is “a dollar saved for retirement.” And every dollar you save in a tax deductible retirement account is a dollar you don’t pay taxes on now.
That’s a dollar you get to keep for as long as you keep it in the retirement account. I know, call me crazy, but I get totally excited about delaying paying taxes for as long as possible.
For years I rallied and complained that the government wasn’t doing enough to make it easy for us to save in tax-favored retirement accounts. I went on Fox’s The O’Reilly Factor and specifically talked with Mr. O’Reilly (who always calls me “Mr. Bach”) about how the IRA tax deductible rules haven’t changed and were stuck at $2,000 a year…FOREVER.
Well, the government listened. Okay, probably not to Mr. O’Reilly and me debate, but they did FINALLY act and began to increase the contribution limits for retirement plans. And millions of Americans took advantage of the changes. Hopefully, you did too.
AND NOW WE’VE GOT INCREASES AND CHANGES FOR 2015 RETIREMENT ACCOUNTS
The IRS just announced the new 2015 Pension Plan Limitations and Rules. Not only have contribution and income limits increased, but a brand new retirement account option is being introduced as well.
Here’s a quick summary for you. Just keep in mind that it’s just a quick summary (not tax advice), so in order to make an informed decision on any action you may want to take concerning your retirement plan in 2015, you’ve got to be thorough in your research, consult your tax advisor or meet with a financial advisor (which I talk more about below.) Sound good? Great, here we go:
- 401(k), 403 (b) and most 457 plans have now increased from $17,500 to $18,000. If you’re 50 or older, the catch-up contribution has also increased by $500, bringing it to $6,000 in 2015.
- IRA income limits have now been increased. Although the limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500, the tax deduction for making a traditional IRA contribution is phased out for investors who have a workplace retirement plan and a modified adjusted gross income between $61,000 and $71,000 for individuals (or $98,000 to $118,000 for couples). That’s up $1,000 and $2,000 respectively from 2014. For individuals who don’t have a workplace retirement plan but are married to someone who does, the tax deduction for an IRA contribution is phased out if the couple’s income is between $183,000 and $193,000 in 2015.
- Introducing myRA. President Obama announced this in the beginning of the year and details are supposed to be forthcoming in December. According to the Treasury’s website, beginning in late 2014, the U.S. Department of the Treasury will offer myRA (“My Retirement Account”), which is a Roth IRA account available to anyone who doesn’t have access to an employer sponsored retirement savings plan and is earning less than $129,000 per year (or $191,000 per year for couples). Plans are portable and contributions can be made through direct deposit. Contributions can be withdrawn tax free and earnings can be withdrawn tax free after five years and the saver is age 59½. After 30 years or $15,000 in savings, the saver must transfer the balance to a private sector retirement account. What’s more, myRA accounts are backed by the U.S. Treasury and are guaranteed not to lose value — and there are no fees. To explore this new option in more detail, click here.
Additional changes include increased Roth IRA income cutoffs and a larger saver’s credit threshold. For more detail, check out the new tax deductible rules for 2015 by clicking here.
GOT RETIREMENT PLANNING QUESTIONS? WE’VE GOT ANSWERS
While I know you can tell by now I’m excited about the new increases to the retirement rules for 2015, I also know by just re-reading what I wrote, that it can easily be confusing. If you have retirement planning questions or need help, remember I now have a team of fee-based financial advisors (the kind I always recommend in my books) available to do financial planning for you and your family. At Edelman Financial Services, we manage $13.7 billion dollars for more than 26,000 clients,1 and have been helping people just like you for more than 25 years.
If you have questions or want to take advantage of a free retirement portfolio review before the year end, you can make an appointment by clicking here or by calling (855) 215-7171. Again, the call is free and the first appointment to review your financial situation and have a portfolio review is also FREE. The end of the year is when I review how my portfolio is doing and make plans for next year, and you should too.
1As of September 30, 2014