2016 IRA and 401(k) plan contribution limits still offer great retirement and tax benefits
Starting on January 1, 2016 the Internal Revenue Services (“IRS”) announced that individuals seeking to making Traditional or Roth IRA contributions or self-employed individuals and small business owners that have adopted a solo 401(k) plan for the 2016 taxable year will be limited by the same annual contribution numbers as in 2015.
In 2016, Traditional and Roth IRA contribution limit will stay the same at $5,500 in 2016. The age 50 catch up limit is fixed by law at $1,000.
For Solo 401(k) plans, the elective Solo 401(k) contribution limit will stay the same at $18,000 in 2016. For those over the age 50 or over, the catch-up contribution limit will also stay the same at $6,000. The total employer plus employee contributions to all defined contribution plans by the same employer will stay the same at $53,000 in 2016.
In the case of SIMPLE 401k and SIMPLE IRA plans have a lower limit than 401k plans. It will also stay the same at $12,500 in 2016. For those over the age 50 or over, the catch-up contribution limit will also stay the same at $3,000.
According to Adam Bergman, a partner with the IRA Financial Group, “although the 2016 IRA and 401(k) plan annual contribution limitations have not increased since 2015, there is still great opportunity to make tax-deferred or Roth contributions which can be the difference between retiring with wealth and having to work the rest of your life.“
For those interested in making Roth IRA contributions, the IRS has increased the income limit for contributing the maximum to a Roth IRA by$1,000 in 2016 to $117,000 for singles and $184,000 for married filing jointly. “One is not able to contribute anything directly to a Roth IRA when your income goes above $132,000 for singles and $194,000 for married filing jointly, both up by $1,000 in 2016. However, you can still do a backdoor Roth IRA.” Stated Mr. Bergman.
Under the 2016 new Solo 401(k) contribution rules, a plan participant under the age of 50 can make a maximum employee deferral contribution in the amount of $18,000 to an IRA Financial Group solo 401(k) Plan. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $53,000 for 2015 or $59,000 if over the age of 50.“ From 2009 to 2016, overall 401(k) plan contributions limits have steadily risen giving self-employed individuals increased incentive to save for retirement,“ stated Mr. Bergman.
For plan participants over the age of 50, an individual can make a maximum employee deferral contribution in the amount of $24,000. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $59,000.
The annual Solo 401k contribution consists of two parts, an employee salary deferral contribution and an employer profit sharing contribution. In 2016 the total contribution limit for a Solo 401k will be $53,000 or $59,000 if age 50 or older. The total allowable contribution limits are combined to get the maximum Solo 401K contribution limit.
IRA Financial Group’s self-directed IRA LLC and solo 401(k) plan offer retirement investors the ability to make traditional as well as alternative asset investments, such as real estate, from a local bank account without any transaction fees. “With IRA Financial Group self-directed retirement plans, making an investment is as easy as writing a check.” Stated Mr. Bergman.
IRA Financial Group proudly announces the latest book titled “The Checkbook IRA” written by tax partner Adam Bergman, which is now available on Amazon. This is the second book in a four-part series on self-directed retirement plans. The first book “Going Solo” is also available on Amazon.
The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP and Dewey & LeBoeuf LLP.
IRA Financial Group is the market’s leading provider of “Checkbook Control” Self Directed IRA and Solo 401k Plans. We have helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate tax-free and without custodian consent!