Earlier this fall, the IRS announced increased retirement account limits for 2015. Retirement accounts that fall under these guidelines include 401(k), 403(b), some 457 plans, and the government’s own Thrift Savings Plan. The limit for the annual contribution to these plans has increased to $18,000 (from $17,500). It is also important to note that people aged 50 and above can now make “catch-up” contributions of $6,000 (an additional $500 from last year’s $5,500).
While these increases can be of great benefit to anyone, it is especially important for people over 50 who may not have saved as much as would be desirable at this stage of life to make the most of their tax-deferred retirement accounts. If you are in that category, you should definitely do what you can to take advantage of the opportunity to make “catch-up” contributions. If you need to make a few sacrifices now, consider that this may be a ‘pay now or pay later’ scenario: finding ways to maximize your retirement contributions while you are still working is better than an underfunded retirement.
The Washington Business Journal adds that the contribution and catch-up limits for those who are at least 50 ($5,500 and $1,000, respectively) for Individual Retirement Arrangements will remain the same for the next year. So while you can contribute more to tax-deferred retirement accounts, you will not be able to add more to an IRA than in previous years.
We have recently discussed a number of situations that may affect retirement for Baby Boomers and others, including earning lower wages, continuing to carry student loan debt, and launching a new business. If you are 50 and over, you owe it to yourself to contribute as much as you possibly can to your retirement accounts while you are still a part of the workforce. And if you need help with retirement planning, don’t go it alone, contact a Fee-Only financial planner.