Posted byon December 7, 2015
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The 2016 Roth IRA limits and Roth 401k contribution limits will not change. It’s time to start planning your contributions for next year.
The 401k limits and IRA limits are determined based on inflation, but can only increase in $500 increments. The 2016 social security wage base will also stay the same.
I highlight the Roth IRA and the Roth 401k because they are my favorite retirement plans; the limits for traditional 401ks and IRAs are the same as the Roth 401k and Roth IRAs. The 2016 limits will stay the same for both the traditional IRA and the traditional 401k. In addition, the 401k limits are also the same for 403b plans and most 457 plans.
Here are the official contribution limits from the IRS:
|Roth 401k Contributions||2015||2016|
|Maximum||$ 18,000||$ 18,000|
|Catch-up 50 and over||$ 6,000||$ 6,000|
|Roth IRA Contributions||2015||2016|
|Maximum||$ 5,500||$ 5,500|
|Catch-up 50 and over||$ 1,000||$ 1,000|
You can make your 2016 contributions as early as January 1, 2016 for the whole year. If you contribute 2016 Roth IRA money between January 1 and April 15, be sure to designate calendar year 2016 if you have already contributed the maximum for 2015.
Since the 2016 limits will stay the same for both the Roth IRA and the Roth 401k, if you use automatic investments, you probably won’t have to make any changes. However, it’s always best to doublecheck your deferral rates.
To maximize your IRA investments, make sure you aren’t paying extra fees in your IRA. You can transfer your IRA to Scottrade to avoid annual fees.
The income limits for Roth contributions in 2016 went up $1,000. You may contribute the full amount to your Roth IRA if your 2016 modified adjusted gross income is below $117,000 for singles ($184,000 for married). You may make partial contributions until your income hits $132,000 ($194,000 for married). If your income is above that, you cannot contribute to a Roth IRA. If you are interested, there is a workaround called the Backdoor Roth IRA if your income is above the limits.
You can still make 2015 contributions before the end of the year for your 401k. The deadline for 2015 IRA contributions is April 15, 2016, the same as the tax deadline.