Retirement Account Changes for 2016 #retirementaccount
As the population continues to age and we see the next generation of seniors coming through our office there are differences in the profile of an aging senior today vs. what we saw 15 or 20 years ago.
One change is in the amount of retirement assets that we see as part of the average client’s overall asset base. It is much higher than 20 years ago. Likewise, we are seeing fewer and fewer clients with substantial pensions. We are also seeing clients in their 60’s working full time to try to put away more for retirement knowing that they do not have pensions to rely on for income and Social Security by itself is not enough. In light of these changes, this week I’d like to take a look at some important changes to retirement account rules.
The amount that may be contributed to an employee’s or self employed retirement account did not increase much because the cost of living index did not increase much. For 401(k), 403(b) and 457 plans the annual contribution limit is still $18,000 with those over 50 years of age able to contribute another $6000 annually as a catch up contribution. The total contribution limits when counting employee and employer contributions is still $53,000 if under age 50 and $59,000 if 50 or older in 2016.
IRA contribution limits also did not change. If you are under age 50 you can contributed $5500 per year and another $1000 as a catch up contribution if you turn 50 or older in 2016. For married couples filing income tax returns jointly, the income limits for Roth IRA contributions increased. This means that the tax deduction starts to phase out now when your modified adjusted gross income (MAGI) is $184,000 and is completely gone when MAGI is $194,000 or more.
This year there is more flexibility for those who want to move money from their retirement plans to their simple IRA. If you contributed to your simple IRA for 2 years, you can shift money to that account. This could be helpful to someone looking to consolidate several retirement accounts.
As I have written about previously, leveraging your retirement accounts to help pay for long term care is a great option for many so as more people are presenting to us with greater amounts in tax deferred retirement accounts we are increasingly looking at these options. For more information, contact me for my most recent book, “Don’t Go Broke in a Nursing Home”, which discusses these strategies.