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2017 inflation-adjusted retirement plan limits

Welcome to Part 3 of the ol' blog's series on 2017 inflation adjustments. 
You can find links to all 2017 inflation posts in the first item:
Income Tax Brackets and Rates.
Today we look at changes to retirement and pension plans.
Note: The 2017 figures apply to 2017 returns that are due in 2018.
For comparison purposes, you'll also find 2016 amounts to be used
in filing 2016 returns due next April.

Save early, save often to create an overflowing nest egg.

Even in a contentious election year, there's one thing everyone in all political parties can agree on: retirement will be better if you start saving as much as you can as soon as you can.

The tax code helps by offering a variety of tax breaks on myriad retirement savings plans.

And each year the Internal Revenue Service looks at inflation and decides whether the tax limits, both on contributions and income levels that affect some plans, need to be tweaked.

Some things remain the same: For the coming 2017 tax year, the IRS says that the income ranges for determining whether you can make tax-deductible contributions to traditional individual retirement arrangement (yes, that is the official name, although most of us, me included, refer to it an individual retirement account, so let's just go with IRA), to contribute to Roth IRAs and to claim the saver's credit all increase in 2017.

But first, let's look at the retirement plan areas remain unchanged from the 2016 levels:

  • The limit on annual contributions to an IRA, traditional or Roth, remains unchanged at $5,500.
  • The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment, so it too remains at $1,000.
  • The contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan remains unchanged at $18,000.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan remains unchanged at $6,000.

Now to the changes affected by inflation.

Earn more, put more in your IRA: The good news is that you can earn a bit more next year and still deduct at least some of your traditional IRA contributions. You also can earn a bit more before you hit the level where your traditional IRA contributions are no longer deductible.

The table below shows the income phase out ranges in 2017 for IRA contributions, along with those in effect for 2016 in case you'd like to add a bit more money to your IRA before Dec. 31.

  2017 phase-out range 
based on *MAGI
2016 phase-out range 
based on *MAGI
Singles and Heads of Households who are covered by a workplace retirement plan $62,000 to $72,000 $61,000 to $71,000 
Married couples filing jointly and the spouse making the contribution is covered by a workplace retirement plan $99,000 to $119,000 $98,000 to $118,000
Married couples filing jointly and the spouse making the contribution has no workplace plan but his/her spouse is offered a retirement plan at his/her job $186,000 and $196,000 $184,000 and $194,000
A married individual filing a separate return and is covered by a workplace retirement plan** $0 to $10,000 $0 to $10,000

*MAGI is modified adjusted gross income. To determine MAGI, take your AGI and add back certain deductions. MAGI and the deductions that must be considered vary depending on the tax break. (Shameless plug: You can check out the ol' blog's glossary for more on MAGI, as well as the previously mentioned individual retirement arrangement/account and lots of other tax terms.)
**No annual inflation adjustment applies in married filing separately situations

More room for Roth contributions: Roth IRA contributions, which are not tax deductible, but are not taxed upon withdrawal in retirement, also face some income limits.

For 2017, taxpayers' Roth contributions are reduced if their earnings are within the income ranges in the following table.

  2017 phase-out range
based on *MAGI
2016 phase-out range
based on *MAGI 
Singles and Heads of Households $118,000 to $133,000 $117,000 to $132,000
Married couples filing jointly $186,000 to $196,000 $184,000 to $194,000

*MAGI is modified adjusted gross income (See previous table and/or blog glossary.)

Once your income exceeds the maximum amount for your filing status, you cannot contribute to a Roth IRA. You can, however, contribute to a traditional IRA and then convert that to a Roth.

Get added credit for saving: The saver's credit is a tax break the rewards low- and moderate-income individual for adding to their nest eggs. You can claim the credit, which maxes out at $1,000, as long as you don't make more than the earnings limit for your filing status.

In 2017, the saver's credit maximum earnings caps go to:

  • $62,000 for married couples filing jointly, up from 2016's limit of $61,500;
  • $46,500 for heads of household, up from $46,125; and
  • $31,000 for singles and married filing separately filers, up from $30,750.

Workplace plan changes: Also in 2017, inflation means some increases in a variety of plans, both provided by workplaces and for self-employed workers:

SEP-IRAs (or, from the glossary, Simplified Employee Pension) and Solo 401(k) are popular retirement vehicles for the self-employed and small business owners.

The maximum amount that can be put into either of these plans as an employer, determined by a percentage of salary, goes to $54,000 in 2017, up from $53,000 in 2016. The compensation limit used to make the calculation also goes up from $265,000 in 2016 to $270,000 in 2017.

If you have a SIMPLE, or savings incentive match plan for employees (final, I swear, glossary plug), the limit on SIMPLE plans for 2017 is $12,500. That's the same as in 2016. The SIMPLE catch-up limit also remains at $3,000.

And where a company offers the traditional defined benefit plan, the limitation on the annual benefit of this retirement plan goes up next year to $215,000. In 2016 the limit is $210,000.

If you want to read the official details, check out IRS' notice on the 2017 pension plan limits and contributions.

Regardless of what kinds of savings vehicles you use to prepare for retirement, put as much as you can under the IRS' inflation limits into the accounts. When it's time to punch that time clock for the last time, you'll be glad you did.

You also might find these items of interest:


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steve jones

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I totally agree with you that retirement will be better if you start saving as much as you can as soon as you can.

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