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Open Enrollment Deserves your FULL Attention. Here’s Why

Earlier this week, I received a note from my employer’s HR department that open enrollment for 2015 benefit elections had started. I instantly got a little giddy.
Every year, I get geeked out to find out …

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2015 Traditional & Roth IRA Contribution Limits
October 24, 2014 | 3 Comments

2015 Traditional & Roth IRA Maximum Contribution Limits

Unfortunately, 2015 will not bring an increase in the maximum individual retirement account contribution amount. The 2015 maximum IRA contribution limit is still capped at $5,500, the same as the 2014 maximum IRA contribution limit.

This comes as a bit of a surprise as the 2015 maximum 401K contribution limit was increased in the same press release.

This contribution limit applies to both Traditional IRA’s and Roth IRA’s. You should note that you can have each type of account, but the annual maximum contribution is for both combined.

The IRS adjusts maximum contribution limits according to changes in the consumer price index (CPI) – and determined that the annual rise in the CPI was too low (~1.5%) to make any changes to the maximum.

Historical IRA Contribution Limits

The last increase came in the 2013 calendar year. I suppose we should not be surprised, however, given how low inflation has been. When the IRS increases the limits, they usually do it in $500 increments. When you’re talking about a $5,500 maximum, a $500 increase is about 10%.

IRA’s have a relatively short history in the American retirement system. Their first year of existence was 1998. Here is how the historical IRA contribution limit has changed since then:

Years:Maximum Contribution (age < 50)Maximum Contribution (age > 50)
1998 - 2001$2,000$2,000
2002 - 2004$3,000$3,500
2005$4,000$4,500
2006 - 2007$4,000$5,000
2008 - 2012$5,000$6,000
2013 - 2015$5,500$6,500

2015 Maximum IRA Catch-up Contribution

2015 ira contribution limitsFor those age 50 and over, the 2015 IRA catch-up contribution will also stay the same, at an additional $1,000. Since the standard contribution is at $5,500, this means the 2015 maximum catch-up contribution plus standard contribution is $6,500 in total.

You are eligible for the catch-up contribution if you turn 50 during any day in the calendar year.

2015 Traditional IRA Income Limits

IRA’s provide a great way to limit your tax liability in the present (Traditional IRA) and in the future (Roth IRA). There are, however, contribution phaseout limits that are based on your income. The good news is that those limits (also tied to CPI) will increase in 2015, even though there was not a contribution increase.

Keep in mind that with Traditional IRA’s, the limits and phaseouts only dictate how much you can deduct from your taxes, not if you can contribute or not. With Roth’s, the limits and phaseouts dictate how much  you can actually contribute, since Roth contributions are not deductible.

Traditional IRA income limits vary slightly from Roth IRA’s (which I’ll get to in a bit) in that they are tied to whether or not you your employer sponsors a retirement plan for you.

If you DO HAVE a retirement plan with your employer:

  • Single or head of household: If your MAGI is $61,000 (up from $60,000) or less, you can take a full deduction. If more than $61,000, but less than $71,000 (up from $70,000) – you get a partial deduction. If over $71,000, you cannot take a deduction.
  • Married filing jointly or qualifying widow(er): If your MAGI is $98,000 (up from $96,000) or less, you can take a full deduction. If more than $98,000, but less than $118,000 (up from $116,000) – you get a partial deduction. If over $118,000, no deduction.
  • Married filing separately: If your MAGI is less than $10,000, you can take a partial deduction. If $10,000 or more, no deduction.

If you DO NOT HAVE a retirement plan through an employer:

  • Single, head of household, or qualifying widow(er): Any MAGI permits a full deduction.
  • Married filing jointly or separately with a spouse who is not covered by a plan at work: Any MAGI permits a full deduction.
  • Married filing jointly with a spouse who is covered by a plan at work: If your MAGI is $183,000 or less (up from $181,000), you can take a full deduction. If more than $183,000, but less than $193,000 (up from $191,000), you can take a partial deduction. If $193,000 or more, no deduction at all.
  • Married filing separately with a spouse who is covered by a plan at work: If your MAGI is less than $10,000, you can claim a partial deduction. If $10,000 or more, no deduction.

2015 Roth IRA Income Limits

The 2015 Roth IRA income phaseout limits are as follows:

  • Married filing jointly or qualifying widow(er): If your modified gross adjusted income (MAGI) is $183,000 (up from $181,000) or less, you can contribute up to the $5,500 max. If at least $183,000 up to $193,000 (up $2,000), your contribution limit is phased out (see IRS publication 590). If $193,000 and above, you cannot contribute to a Roth IRA.
  • Single, head of household, or married filing separately and you did not live with your spouse at any time during the year: If under $116,000 (up from $114,000), you can contribute up to the $5,500 maximum. If at least $116,000 up to $131,000 (was $129,000), your contribution limit is phased out. If $131,000 and up, you cannot contribute to a Roth IRA.
  • Married filing separately and you lived with your spouse at any time during the year: If MAGI is between $0 and $10,000, your contribution limit will phase out. If $0, you can contribute up to the $5,500 maximum ($6,500 if over 50 years old). If $10,000 and above, you cannot contribute to a Roth IRA.

Taking Advantage of IRA’s

If you have old 401K’s sitting around from jobs long forgotten, you should consider consolidating your 401K’s and rolling over to an IRA. IRA’s typically have lower fees associated with them. I have IRA’s with Vanguard and TradeKing.

Also, note that you can still contribute to your IRA’s for the 2014 calendar year up until the tax deadline next April. And you can begin contributing for 2015 on Jan. 1, 2015.

Will you contribute to an IRA for the 2014 and 2015 calendar years? How much?

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