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]
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Matt says
Thanks for putting these together. It was one of these posts a couple of years ago that led me to your blog in the first place, and the rest of the content that kept me coming back.
Dividend Growth Investor says
Harry,
Thanks for putting this together. Based on my understanding of the situation, an employee who has access to a 401 (k) and a 457 plan can defer $18,000 per year in EACH plan. Actually, that is what Justin from Root of Good did to speed up his retirement process.
Harry Sit says
That’s true. The limit for 457 plan is separate, but not everyone has a 457 plan. This post is more about the limit itself, not how the limits interact with each other.
Dividend Growth Investor says
Thanks. I have a question. I have a friend who earns $100K, and maxes out 401 (k) – $18K pre-tax and 3K match and 31K After-Tax ( MegaRoth). He also earns $20K from self employment. Question is, can he max out a SEP IRA for the say roughly $4K or does that come under the $53K total 401K contribution limit ( even though a SEP and 401 K are two separate beasts)
Harry Sit says
The $53k limit is per-employer. He can contribute another $4k to SEP when his own business is separate from his day job.
joe says
Nice article.
Question. A friend of mine is getting a 401k job where they will be making $300,000. The problem is the job does not offer a 401k.
Can they open an ira and get a tax deduction because their job doesn’t offer a 401k or is there an income phaseout for the tax deduction at that income? In the past that seemed to be okay but I can’t find the info for this year.
Harry Sit says
If your friend is single he/she can contribute to a traditional IRA and take a deduction (no income limit). If he/she is married, they must file jointly and his/her spouse must also NOT be covered by a workplace retirement plan. See 2015 IRA Deduction Limits – Effect of Modified AGI on Deduction if You Are NOT Covered by a Retirement Plan at Work.
cato says
Do we know yet where FICA contributions max out in 2016?
Harry Sit says
Don’t know that one. It goes by a different index, with no monthly releases.
sscritic says
You can guess what the increase in the NAWI will be from 2013 to 2014, then apply the formula and the rounding rules, just as you did for the other limits. From 2012 to 2013, the increase was 1.3%, and the Usual Weekly Earnings Summary report for 4th quarter 2014 shows an increase of 1.7% over 2013.
“Median weekly earnings of the nation’s 107.4 million full-time wage and salary workers were $799 in the fourth quarter of 2014 (not seasonally adjusted), the U.S. Bureau of Labor Statistics reported today. This was 1.7 percent higher than a year earlier, compared with a gain of 1.2 percent in the Consumer Price Index for All Urban Consumers (CPI-U) over the same period.”
A 1.5% increase in the NAWI looks like a reasonable guess, but if you want to refine it a little, look at all four quarters of 2014 weekly earnings vs 2013.
Harry Sit says
I just learned when there is no Social Security COLA, the law prohibits an increase in Social Security wage base, no matter what the national average wage index comes out to.
http://ssa.gov/news/press/releases/#/post/10-2015-1
Larry says
Just to clarify: the $53K max contributions allowed on all plans does not include 457 plans, correct? Per the IRS website, 457s have their own limits and are not included in that respective threshold.
http://www.irs.gov/Retirement-Plans/How-Much-Salary-Can-You-Defer-if-You%E2%80%99re-Eligible-for-More-than-One-Retirement-Plan
BTW- love the blog, I find it very helpful.
Harry Sit says
That’s correct. Also see comment #2 above. Thank you for the love.
Retirement Planner says
In 2015, via two employers, I’ll have made contributions (through my own funds, not employer funds/matches) to a Roth After-Tax account within a 403b plan and to a SIMPLE IRA account. Are my annual contribution limits (i) 18k and 12.5, respectively, or 30.5k in total; or (ii) 18k in total across the two plans as the cap on elective deferrals is 18k/year? Are after-tax contributions to a Roth account within a 403b plan subject to the elective deferral cap?
Harry Sit says
You (ii) above. Roth contribution to 403(b) counts toward the elective deferral limit. See https://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-SIMPLE-IRA-Contribution-Limits
Maria Saavedra says
Sir, the IRS does not come out with the CPI numbers, the Bureau of Labor Statistics does. Today, October 15, 2015, the BLS issued the CPI number for September 2015. This rate, with the rate for August and July 2015 are used to compute the IRS pension limits. However, no figures are considered official until the IRS releases the news release with those figures. As of 3:05 p.m. this afternoon, that press release has not been issued. Your figures are not official IRS figures.
Harry Sit says
Updated to “The government released …” Official or not, with all CPI numbers out, it’s simple math at this point. A 2nd grader can calculate the same numbers. The IRS has to follow the math written into the law. They can take their sweet time in composing the press release. It’s not going to change anything.
J Schmidt says
Do you have numbers for the Retirement Savings Contributions Credit (Saver’s Credit) cutoffs for 2016? When is this information usually released, and what cpi numbers are they based on?
I see this IRS page https://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-Retirement-Savings-Contributions-Credit-%28Saver%E2%80%99s-Credit%29 has 2014 and 2015 numbers, so I guess the 2016 numbers will show up there eventually.
Actually is there a good centralized source that explains how all the CPI-linked tax-related numbers are calculated?
Harry Sit says
Increase by $500 for married filing jointly, $250 for single. They are based on the same CPI-U numbers as IRAs. Centralized source is the Internal Revenue Code in various sections.
Monte Hill says
Have you heard of a change in 2016 that would allow the employer Roth 401k match to be put into your Roth 401k account instead of your Traditional 401k account?
Thank you,
Monte
Harry Sit says
There is no such change. Employer match is always pre-tax.
Meryl says
Are the 403b,401k, and SIMPLE IRA limits of $18.000 (+$6,000 catch-up) separate from the Traditional or Roth IRA limits of $5500 (+$1000 catch-up)?
I am eligible for the catch-up contributions and need to know if I can contribute $24k to my 403b plans plus the $6500 I contribute to my Roth IRA or if the limit for all these contributions combined is $24k.
Harry Sit says
They are separate.
Charles Hudak says
I am 64 years old and wonder what is the total of elective salary defferals plus employer matching contributions is limited to in 2016…is it $53,000 plus the $6,000 catch-up contribution for over 50 year olds for a total of 59,000?
Harry Sit says
It is, but the catch-up had to be elected separately. If you didn’t do the catch up, it can’t be made up with employer contributions.
Dave Heim says
can I contribute to my ROTH IRA (for 2017) the $5500 and the $1000 catch up (I am over 55), AND the $12,500 plus $3000 catch-up to an existing SIMPLE IRA?
Harry Sit says
Only if you are under the income limit for contributing to a Roth IRA.
juan says
wife has 403b thru her teaching job. if she only contributed 12000 in 2016, can she contribute more (up to max) between jan 2017 and april 2017?
Harry Sit says
No.
juan says
so i saw a reply of no. so it is different than roth and iras where you can contribute to previous year up till tax day?
Harry Sit says
It’s different.