November 8th, 2016
The 2017 figures have been announced for IRA and employer plan contribution limits.
IRA contribution limits
- The maximum amount you can contribute to a traditional IRA or Roth IRA in 2017 is $5,500 (or 100% of your earned income, which ever is less), unchanged from 2016.
- The maximum catch-up contribution for those age 50 or older remains at $1,000. (You can contribute to both a traditional and Roth IRA in 2017, but your total contributions can’t exceed these annual limits.)
Traditional IRA deduction limits for 2017
The income limits for determining the deductibility of traditional IRA contributions in 2017 have increased.
- If your filing status is single or head of household, you can fully deduct your IRA contribution up to $5,500 in 2017 if your MAGI is $62,000 or less (up from $61,000 in 2016).
- If you’re married and filing a joint return, you can fully deduct up to $5,500 in 2017 if your MAGI is $99,000 or less (up from $98,000 in 2016).
- And if you’re not covered by an employer plan but your spouse is, and you file a joint return, you can fully deduct up to $5,500 in 2017 if your MAGI is $186,000 or less (up from $184,000 in 2016).
|Single or head of household
||$62,000 and $72,000
||$72,000 or more
|Married filing jointly or qualifying widow(er)*
||$99,000 and $119,000 (combined)
||$119,000 or more (combined)
|Married filing separately
||$0 and $10,000
||$10,000 or more
*If you’re not covered by an employer plan but your spouse is, your deduction is limited if your MAGI is $186,000 to $196,000, and eliminated if your MAGI exceeds $196,000.
Roth IRA contribution limits for 2017
The income limits for determining how much you can contribute to a Roth IRA have also increased for 2017.
- If your filing status is single or head of household, you can contribute the full $5,500 to a Roth IRA in 2017 if your MAGI is $118,000 or less (up from $117,000 in 2016).
- And if you’re married and filing a joint return, you can make a full contribution in 2017 if your MAGI is $186,000 or less (up from $184,000 in 2016). (Again, contributions can’t exceed 100% of your earned income.)
|Single or head of household
||More than $118,000 but less than $133,000
||$133,000 or more
|Married filing jointly or qualifying widow(er)
||More than $186,000 but less than $196,000 (combined)
||$196,000 or more (combined)
|Married filing separately
||More than $0 but less than $10,000
||$10,000 or more
Employer retirement plans
- Most of the significant employer retirement plan limits for 2017 remain unchanged from 2016.
- The maximum amount you can contribute (your “elective deferrals”) to a 401(k) plan in 2017 is $18,000. This limit also applies to 403(b), 457(b), and SAR-SEP plans, as well as the Federal Thrift Plan.
- If you’re age 50 or older, you can also make catch-up contributions of up to $6,000 to these plans in 2017. [Special catch-up limits apply to certain participants in 403(b) and 457(b) plans.]
- If you participate in more than one retirement plan, your total elective deferrals can’t exceed the annual limit ($18,000 in 2017 plus any applicable catch-up contribution). Deferrals to 401(k) plans, 403(b) plans, SIMPLE plans, and SAR-SEPs are included in this aggregate limit, but deferrals to Section 457(b) plans are not. For example, if you participate in both a 403(b) plan and a 457(b) plan, you can defer the full dollar limit to each plan—a total of $36,000 in 2017 (plus any catch-up contributions).
- The amount you can contribute to a SIMPLE IRA or SIMPLE 401(k) plan in 2017 is $12,500, and the catch-up limit for those age 50 or older remains at $3,000.
|401(k), 403(b), governmental 457(b), SAR-SEP, Federal Thrift Plan
Note: Contributions can’t exceed 100% of your income.
- The maximum amount that can be allocated to your account in a defined contribution plan [for example, a 401(k) plan or profit-sharing plan] in 2017 is $54,000, up from $53,000 in 2016, plus age 50 catch-up contributions. (This includes both your contributions and your employer’s contributions. Special rules apply if your employer sponsors more than one retirement plan.)
- Finally, the maximum amount of compensation that can be taken into account in determining benefits for most plans in 2017 is $270,000 (up from $265,000 in 2016), and the dollar threshold for determining highly compensated employees (when 2017 is the look-back year) is $120,000, unchanged from 2016.
Based on an article Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016
February 27th, 2015
In the LearnVest article online this week “30 or Bust? What Retirement Really Looks Like When You Put Off Saving” the article discusses the advantages of starting retirement saving in your 20s, and ways to ramp up your savings if you are starting in your 30s.
The majority of the reading audience is self-directed investors that are looking for financial education, probably not going to hire an advisor, and definitely need to know how to best help themselves. She asked me when she interviewed me if I thought that people should use online retirement calculators. I told her, “yes!” They should use everyone one of them that they could get their hands on. I told her that in the online calculators that I have seen, there are usually one or two assumptions that I don’t like, but if you can do several of them that would give you a better picture than not doing planning or doing just one.
One challenge that I have as a professional financial advisor is that the majority of clients that come to me for retirement planning are coming to me in their 50s or sometimes in their 60s and they have never estimated how much they need for retirement. Therefore some of the plans I do require some kind of adjustment in expectations:
1) saving more between now and retirement than they thought they needed to or
2) retire a little later than they hoped or
3) spend less than they had imagined they would,
or a combination of the three.
Which work out fine, and clients go away feeling relived to know what needs to happen to be on track. But if they pulled up calculators when they were 20 or 30 and did some preliminary estimates, wow! The results would be terrific. And I am seeing more 20 and 30 year olds coming to see me for help with balancing financial goals.
I was so thrilled to participate in this article. Financial journalists reach so many more investors than financial advisors ever could. I am so glad that this message can get out. Saving early has a big impact!
February 26th, 2015
The St Louis Post Dispatch quoted me in their article “Is Your Honey Good With Money? Better Find Out Before Tying The Knot.” in the Sunday paper.
I shared my thoughts on couples and financial compatibility. As a financial advisor for twenty some years, I have worked with many different couples of various age ranges, so I was able to share some ideas for checking to see if you think about money in the same way.
Even if you don’t, one of the most important things to do is to talk about it before you marry. Money squabbles are one of the leading causes of divorce. Valentine’s Day has just passed and love is in the air, take a look at this article to make sure it stays that way!
September 3rd, 2013
Unexpected financial expenses seem to crop up at the least opportune time. The car needs a new transmission, you lose your job, or a parent or child becomes ill and you need to reduce your hours at work in order to care for them, taking an unexpected reduction in income. All of these expenses, and others, can drain savings quickly.
Why have an emergency fund?
You can resort to using credit cards to pay for emergency expenses however, worrying about paying down your growing credit card balance can lead to further stress during an already difficult period. You will experience “one step forward and two steps back” where it’s hard to see any progress.
How to create an emergency fund.
The better choice is to establish an emergency fund now. Determine how much money you want to set aside in the emergency fund and set up an automatic deposit into that account once a month for a small amount, so that you establish the habit of adding to the emergency fund. If you have finished paying off a monthly loan of some kind, consider immediately setting that money aside for the emergency fund so you don’t use it for daily expenses. Set up an account with your bank that is not easily accessible so there is less temptation to use the money.
Remember a large screen TV or a vacation is not an emergency. If large items such as these, are on your wish list, start saving for them separately and only use your emergency fund for true emergencies.
How much should you have in an emergency fund?
The rule of thumb is to keep six to twelve months of living expenses in savings for emergency funds.
Whereas a dual income family could get away with six months of income in savings, if you are a single income household, you would want twelve months of income saved.
If you and your spouse work for the same company, there is a greater risk of you both losing your jobs at the same time, therefore it would make sense to keep twelve months.
Having an emergency fund will reduce your stress during periods of difficulty because you can tackle the situation and not worry about the financial aspect.
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