IRS Announces 2016 Retirement Plans Contribution Limits For 401(k)s And More

The Treasury Department has announced inflation-adjusted figures for retirement account savings for 2016, and there are a few minor tweaks to income phase-outs for certain IRA contributors and to the adjusted gross income limits for snagging the saver’s credit. But the real message this year: there’s no extra room for savings for wage and salary types and the self-employed.

Déjà vu. That’s what happened for 2014, when pension contribution limits stayed the same as in 2013. Last year we saw small increases in the maximum amounts you could save for 2015, and those increases are carried over for 2016. What’s to blame? The cost-of-living index did not meet the legal thresholds that trigger increases. Yet with inflation lurking and retirement savings falling short, workers and their spouses should eke out every last opportunity for tax-advantaged savings. If you’re 50 or older you can stuff $24,000 as employee deferrals into a 401(k), for example. Here are the details.

401(k)s. The annual contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan, is $18,000 for 2016, the same as in 2015.

The 401(k) Catch-Up. The catch-up contribution limit for employees age 50 or older in these plans also stays the same at $6,000 for 2016. Even if you don’t turn 50 until Dec. 31, 2016, you can make the additional $6,000 catch-up contribution for the year. If your plan lets you, you might want to frontload your catch-up contributions.

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