Michele Clark
Clark Hourly Financial Planning - Chesterfield, MO Advisor
1415 Elbridge Payne Road, Suite 255
Chesterfield, MO 63017 USA
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2017 IRA and Retirement Plan Limits Announced

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).
If your 2017 federal income tax filing status is: Your IRA deduction is limited if your MAGI is between: Your deduction is eliminated if your MAGI is:
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.)
If your 2017 federal income tax filing status is: Your Roth IRA contribution is limited if your MAGI is: You cannot contribute to a Roth IRA if your MAGI is:
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.
Plan type: Annual dollar limit: Catch-up limit:
401(k), 403(b), governmental 457(b), SAR-SEP, Federal Thrift Plan $18,000 $6,000
SIMPLE plans $12,500 $3,000

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

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Michele Clark in the News: Learnvest article about Understanding Retirement Planning Benefits of Different IRAs

September 2nd, 2016

I was honored to be quoted recently in the article “Traditional vs. Roth IRAs: Understanding the Retirement Planning Benefits of Each” on Learnvest. It is a good introduction to the differences between the two types of IRA accounts and when you might choose between them.

Some of the differences and rules covered are:

  • Contribution Limits
  • Taxes
  • Income Restrictions
  • Withdrawals

 

I find when planning with families that the decision is a multi-step process. We need to take into consideration all of the vehicles available to them including work and/or self-employment, their potential matching from employers, if they have a spouse and if the spouse is considered an active participant in an employer plan, the quality of their plans, their income phaseout thresholds, and their entire picture of financial goals ranging from short term to long term to determine how much they can afford to put toward all of their goals.  That then informs us what the best vehicle is, or in most cases, vehicles are.

 

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IRA account changes for 2013

November 9th, 2012

The maximum amount that you can put into your IRA is increasing in 2013 from $5,000 to $5,500.  This holds true for Traditional IRAs and Roth IRAs.  The Catch-Up Contribution, for those over 50 years old, will remain the same at $1,000.

Earned income

In order to invest in an IRA you must have earned income.  People ask if they can count income they “earn” from investments, the answer is no.  Earned income is income earned from working.  If your income is less than $5,500 keep in mind you must have earned income to make a contribution , so you can only contribute $5,500 or 100% of earned income whichever is less.  Examples of earned income given on the irs.gov website are:

Earned Income:

  • Wages
  • Salary
  • Tips
  • Union strike benefits
  • Long-term disability benefits received prior to retirement age
  • Net earnings from self-employment

Income that is not Earned Income:

  • Pay received for work while an inmate in a penal institution
  • Interest and dividends
  • Retirement Income
  • Social Security
  • Unemployment benefits
  • Alimony
  • Child Support

Traditional IRA

Everyone with earned income can invest in a Traditional IRA.  However, not everyone can deduct the contribution that they make to a Traditional IRA.  There are IRA deduction phase-out limits for active participants in employer sponsored retirement plans, or if one person in a married couple is an active participant.  The phase-out limits are based on your tax filing status.

The way the phase-out works is you can deduct the full amount when your modified adjusted gross income falls below the low end of the phase-out.  You cannot deduct anything once your modified adjusted gross income hits the high end.  And you can deduct a pro rata portion when it falls in the middle range of the phase-out.

  • Single $59,000 to $69,000
  • Married Filing Jointly (for spouse covered by employer retirement plan) $95,000 to $115,000
  • Married Filing Jointly (for spouse that is not covered by employer retirement plan, but married to a covered spouse) $178,000 and $188,000

Roth IRA

Not everyone can make a Roth IRA contribution.  In order to make the full contribution your modified adjusted gross income must be below the phase-out threshold.  If your modified adjusted gross income hits the top of the phase-out range you cannot make a contribution at all.  If your modified adjusted gross income falls in the middle of the phase-out range you can make a pro rata contribution.

  • Single $112,000 to $127,000
  • Married Filing Joint $178,000 to $188,000

Many people have automatic investing set up so that they put a little each month into their IRA accounts.  If you do this, be sure to make the adjustment to increase the amount you are putting into your IRA account, you can put another $41.66 a month away in 2013.  Every little bit helps!

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Employer Retirement Accounts: 2013 Contribution Limits

October 26th, 2012

An excellent way to save

What is my favorite feature of investing in your retirement plan at work?  No, it’s not the employer match, well alright it is the match, but a very close second is the fact that it is automatic!

The Elephant

Because companies are doing away with pension plans, saving for retirement can seem like an impossibly huge task.  But as the old saying goes “How do you eat an elephant? One bite at a time.”  Having a little money taken out of each paycheck and deposited automatically into an employer sponsored retirement account is taking that one bite at a time.  Eventually you will get that Retirement Elephant eaten.

Change in contribution limits

Each year the IRS announces if there are changes in the maximum contribution limits to employer plans due to cost-of-living increases.  Why is that important to you?  Because you can take bigger bites; and get that Retirement Elephant eaten sooner.  The catch is, depending on the instructions you set up for 2012, you may need to take action and contact your Human Resources department to let them know that you want to increase the amount you are investing in your retirement plan.  This is the month that HR usually wants to hear from you about these decisions, so the timing is right.

401(k), 403(b), 457, and SARSEPs

The 2013 maximum contribution limit is $17,500, an increase of $500 over 2012.  Be sure to contact your company to take advantage of the opportunity to put more money into your plan next year!  If you are 50 or turning 50 in 2013 you have the opportunity to add additional money to your employer sponsored retirement plan each year in the form of a Catch-up Contribution, the amount for 2013 is $5,500 the same amount as last year.  However, please check to make sure you are taking advantage of this opportunity; it is common for me to find that new clients are not doing this, and have often never even heard of a Catch-up Contribution.  But now you have, and you can take full advantage of it!

SIMPLE plan

The maximum contribution limit also went up for the SIMPLE, it will be $12,000 in 2013 whereas it was $11,500 in 2012.  If you are 50 or turning 50 in 2013 the Catch-up Contribution for SIMPLEs in 2013 will be unchanged at $2,500.

What to do

Check to see what you are contributing to your employer sponsored retirement plan, if you want to “put the max in” as I so often hear, make sure that you do that by adjusting the numbers for the new 2013 increases.

If you are over 50 or will turn 50 in 2013, make sure that you take advantage of the Catch-up Contribution which allows you to put additional money in the account.

If you are not “putting in the max” make sure that you are getting at least the full amount of the match from your company.  This needs to be balanced with having an emergency fund/savings account.

Once you have gotten to the point of getting all of the match, and establishing the appropriate emergency fund for your family, you need to evaluate all your goals and make sure that you deploy any extra cash among those goals in a way that fits with your priorities and values.

A hint for increasing your retirement savings – each time you get a raise, increase your retirement account contribution by one percent.  You will not even feel the loss, because it is money you didn’t even have yet.

Take action today, and you will be that much closer to retirement!

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2012 Contribution Limits: Employer Retirement Accounts

January 19th, 2012

How much should I put in my retirement account each year?
The answer of course, depends. For example, some clients tell me they love working and they want to work until they are 70, some tell me they plan to work until 65, others tell me they want to retire yesterday. The earlier you retire, the more you need to save. Some people spend $60,000 per year, some spend $160,000 and some $260,000; and they want to maintain a similar lifestyle in retirement. Obviously, the more you want to spend in retirement the more you need to save now. There are other variables to consider as well, such as pensions, social security, current investment holdings, assumed rates of return, any plans for bequests, and large purchases in retirement, etc. So how much you need to put in your retirement account will be different for each family.

So where do you start?
A good place to start is with your company’s retirement plan and knowing the maximum amount that you can put into the plan. There are different types of retirement plans, dependent upon the type of company for which you work. And consider, if your company says the maximum percentage is for example, 10%, and you make $60,000 then your maximum is $6,000 even if the IRS says the maximum dollar amount is higher.

401(k), 403(b), 457, and SARSEPs
The 2012 maximum contribution limit is $17,000. If you are 50 or turning 50 in 2012 you have the opportunity to add additional money to your retirement plan each year in the form of the Catch-up contribution, that amount for 2012 is $5,500.

SIMPLE plan
The 2012 maximum contribution limit is $11,500. If you are 50 or turning 50 in 2012 you have the opportunity to add additional money to your retirement plan each year in the form of the Catch-up contribution, that amount for 2012 is $2,500.

It’s on your To-Do. Let’s get it To-Done!
1) Already have your plan set to max? Better double check it! 2012 is the first year since 2009 that the maximum contribution has been raised for 401(k), 403(b), 457, and SARSEPs because it is tied to inflation. Catch-up contributions remain unchanged. SIMPLE plan contributions and SIMPLE plan Catch-ups remain unchanged as well.
2) Not yet taking advantage of your employer’s match? Want some inspiration; pick up a calculator and figure out how much free money you are not taking from your employer each year! Then, each time you get a raise, increase your 401(k) contribution by 1%, you will not even feel it, because it is money you never had in your hands. Or have you been putting it off because you have been busy or unsure how to start? Give your HR department a call today.

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