A Few Major Changes to Your 2015 Retirement Savings
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A Few Major Changes to Your 2015 Retirement Savings

It’s tough for most of us to save for retirement because we need the cash flow now, especially at a time of stagnant wages. Next year, assuming we can swing it, we can add a little extra tax-deferred money to our retirement savings thanks to new guidelines just announced by the Internal Revenue Service

Here’s how it breaks down: 

For 401(k)s:
Employees under age 50 who participate in a 401(k) or other workplace retirement plan will be able to put a total of $18,000 into their tax-deferred account, up $500 from this year’s $17,500 limit.

Related: Are 401(k) Plans Setting Up Millennials for Pain?

The government also expanded the so-called “catch-up contributions” available to those age 50 and older. Eligible older workers can now put an additional $6,000 per year into their 401(k)s, up from $5,500 this year – for a total of $24,000.

The increase in these limits, however, may have little real impact for most savers: Last year just 13 percent of people eligible for a workplace retirement plan saved the maximum amount, according to a recent Vanguard report. In some cases, employers set contribution limits below the federal limits.

“You look at the $18,000 and wonder, gee, how many people can practically get to that level?" Joe Ready, director of Wells Fargo Institutional Retirement and Trust, told CNBC. But as people move forward “in their careers and earnings progressively go up,” it becomes increasingly important for older investors to max out the $24,000 limit, he said.

For IRAs:
The IRS did not make any changes to the $5,500 annual limit for IRA contributions or the $1,000 catch-up limit for savers over age 50. It did slightly increase the income levels at which savers are eligible for the full IRA deduction.

Related: A Written Retirement Plan Can Double Your Savings

Next year, the deduction will phase out for those with access to a workplace retirement account between $61,000 and $71,000 for single taxpayers, and between $98,000 and $118,000 for married filers.

For Roth IRAs:
The deduction phases out for Roth IRA contributions in 2015 for single filers with adjusted gross income between $116,000 and $131,000, and for married couples with adjusted gross income of  $183,000 to $193,000.

The retirement savings adjustments came about because of an increase in cost-of-living expenses. Each year the Treasury must rejigger limits to reflect those increases.

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