In October the IRS released the contribution limits for 2016—such as they are because not much changed. Why? The cost-of-living index did not meet the requirements needed for a change in limits, meaning that inflation this year was low. (Sigh.)
Knowing what the contribution limits are for your account is critical in planning your budget for the upcoming year. Hopefully, you’ll be able to make the full amount, for doing so will help you reach your retirement goals.
So, without a lot of ceremony, here’s what you need to know about how the contribution limits affect your self-directed retirement and other plans with Advanta IRA:
Traditional and Roth IRA contribution limits remain the same at $5,500 with catch-up contributions of $1,000 for ages 50 and over.
Solo or individual 401(k) plans continue to allow employees up to $18,000 in contributions with catch-ups of $6,000 for ages 50 and over. The employer profit-sharing portion remains at 25 percent of the salary of self-employed earnings (or at 20 percent for sole proprietors and single-member LLCs). Keep in mind that the total employee/employer contributions cannot exceed $53,000 for those under 50, or $59,000 for those over that age.
Savings incentive match plans (SIMPLE IRAs) remain unchanged, allowing up to $12,500 in contributions with a $3,000 catch-up allowance for those aged 50 and older.
Simplified employee pension plans (SEP IRAs) continue allowing the lesser of $53,000 or 25 percent of compensation.
Health savings account contributions for individuals remain the same in 2016 at $3,350. However, family plans were moved up from $6,650 in 2015 to $6,750 in 2016. Both individual and family plans continue to provide $1,000 in catch-up allowances for those 55 or older.
Education savings accounts have not experienced a change in limits for quite some time, and this remains true for the year 2016.
Again, trying to max out the yearly contribution limits to any of the above plans serves to reach your goals in obtaining enough income for retirement, to put your child through college, or to cover qualified medical costs. However, even if you are unable to meet the limit, every little bit helps. Plan to do the best you can.
For a full explanation of requirements and changes, visit the IRS publication announcing this information.
If you have questions about this article or wish to learn more about self-directed accounts, please contact Scott Maurer, director of business development of Advanta IRA Services in Florida and of Advanta IRA Administration in Georgia. He may be reached by emailing SMaurer(at)AdvantaIRAGroup(dot)com or by calling (800) 425-0653 ext. 1123.