401(k) and IRA Contribution Limits
Welcome to the 2016 tax season. Most contribution limits did not change this year. The IRS bases its adjustments on cost-of-living index analyses. Since there was little change this year the contribution limits did not change for 2016. There were changes to deduction limits, which we will cover in our next post.
401k, 403b or 457 plans, you can contribute up to
IRAs, Traditional and Roth, you can contribute up to
SIMPLE 401K and SIMPLE IRA
BTW The above and below limits are for the 2015 tax year ending in April and the 2016 tax year (the one we will be worrying about this time next year ;-). Also, an answer to the oft-asked question of employer matches and 401k contributions: Employer-matching contributions don’t count toward the maximum limits you can contribute to your 401k plan.
However, keep this in mind in case you are lucky enough to hit it: There is a combined-contribution-limit of $53,000; in other words your contribution + your employer’s match cannot exceed $53K. Also, keep in mind that the Highly Compensated Employee (HCE) definition remains unchanged for 2016 at $120,000.
For those over 50
IRAs, both traditional and Roth, you can contribute up to
$6,500 ($5,500 + $1,000 in catch-up contributions)
401k, 403b or 457 plans can contribute up to
$24,000 ($18,000 + $6000 in catch-up contributions)
SIMPLE 401K or SIMPLE IRA
$15,500 ($12,500 + $3000 in catch-up contributions)
When it comes to Simplified Employee Pension IRAs the total contributions to each employee’s account cannot exceed the lesser of $53,000 or 25% of compensation each year for 2015 and 2016. Don’t forget that with a SEP-IRA the amount of compensation taken into account under the plan cannot exceed $265,000 in 2015 and 2016 (meaning no one can make more than that in salary or compensation each year from the company and have a SEP).
Nothing in this article should be construed as investment advice, or a solicitation or offer, or recommendation, to buy or sell any security. Investing in mutual funds, exchange traded funds, and other securities carries risk of all or part of the amount invested. Past performance is no guarantee of future results. FeeX assumes no responsibility for the tax consequences to any investor of any transaction, investors should confer with their personal advisor or tax professional regarding their particular circumstances.