The government released the official CPI numbers. They determined the 2016 contributions limits for various retirement plans and IRAs. Inflation is very low this year. For the most part, the limits in 2016 will stay the same as in 2015.
401k/403b/457 Elective Deferral Limit
401k/403b/457 contribution limit will stay the same at $18,000 in 2016. If you are age 50 or over, the catch-up contribution limit will also stay the same at $6,000. Employer match or profit sharing contributions aren’t included in these limits. 401k/403b and 457 contribution limits are separate.
Annual Additions Limit
The total employer plus employee contributions to all defined contribution plans by the same employer (not including 457 plans) will stay in the same at $53,000 in 2016. The age-50-or-over catch-up contribution is not included in this limit.
Highly Compensated Employee Threshold
If your employer limits your contribution because you are a Highly Compensated Employee (HCE), the minimum compensation stays the same at $120,000 in 2016.
SIMPLE 401k and SIMPLE IRA Contribution Limit
SIMPLE 401k and SIMPLE IRA plans have a lower limit than 401k plans. It will also stay the same at $12,500 in 2016. If you are age 50 or over, the catch-up contribution limit will also stay the same at $3,000.
Traditional and Roth IRA Contribution Limit
Traditional and Roth IRA contribution limit will stay the same at $5,500 in 2016. The age 50 catch up limit is fixed by law at $1,000. The IRA contribution limit and the 401k/403b/SIMPLE contribution limit are separate.
Deductible IRA Income Limit
The income limit for taking a full deduction for your contribution to a traditional IRA while participating in a workplace retirement will stay the same in 2016 at $61,000 for singles and $98,000 for married filing jointly. The deduction completely phases out when your income goes above $71,000 for singles and $118,000 for married filing jointly, the same as in 2015.
The income limit for taking a full deduction for your contribution to a traditional IRA when you are not covered in a workplace retirement but your spouse is will go up by $1,000 in 2016 to $117,000 for singles and $184,000 for married filing jointly. The deduction completely phases out when your income goes above $132,000 for singles and $194,000 for married filing jointly, both up by $1,000 in 2016.
Roth IRA Income Limit
The income limit for contributing the maximum to a Roth IRA will go up by $1,000 in 2016 to $117,000 for singles and $184,000 for married filing jointly. You can’t contribute anything directly to a Roth IRA when your income goes above $132,000 for singles and $194,000 for married filing jointly, both up by $1,000 in 2016. You can still do a backdoor Roth IRA in such case.
Saver’s Credit Income Limit
The income limits for receiving a Retirement Savings Contributions Credit (“Saver’s Credit”) will go up by $500 for married filing jointly, to $37,000 (50% credit), $40,000 (20% credit), and $61,500 (10% credit). The limits for single will go up by $250, at half of the limits for married filing jointly, to $18,500 (50% credit), $20,000 (20% credit), and $30,750 (10% credit).
All Together
| 2015 | 2016 | Increase | |
| Limit on employee contributions to 401k, 403b, or 457 plan | $18,000 | $18,000 | None |
| Limit on age 50+ catchup contributions to 401k, 403b, or 457 plan | $6,000 | $6,000 | None |
| Traditional and Roth IRA contribution limit | $5,500 | $5,500 | None |
| Traditional and Roth IRA age 50+ catchup contribution limit | $1,000 | $1,000 | None |
| SIMPLE 401k or SIMPLE IRA contributions limit | $12,500 | $12,500 | None |
| SIMPLE 401k or SIMPLE IRA age 50+ catchup contributions limit | $3,000 | $3,000 | None |
| Maximum annual additions to all defined contribution plans by the same employer | $53,000 | $53,000 | None |
| Highly Compensated Employee definition | $120,000 | $120,000 | None |
| Deductible IRA income limit, active participant in workplace retirement plan, single | $61,000 – $71,000 | $61,000 – $71,000 | None |
| Deductible IRA income limit, active participant in workplace retirement plan, married filing jointly | $98,000 – $118,000 | $98,000 – $118,000 | None |
| Deductible IRA income limit, spouse is active participant in workplace retirement plan | $183,000 – $193,000 | $184,000 – $194,000 | $1,000 |
| Roth IRA income limit, single | $116,000 – $131,000 | $117,000 – $132,000 | $1,000 |
| Roth IRA income limit, married filing jointly | $183,000 – $193,000 | $184,000 – $194,000 | $1,000 |
[Photo credit: Flickr user SalFalko]
