Planning Your 2016 Retirement Plan Contributions
Retirement planning and contributions have been a part of America since 1875 when they were first introduced to the workforce as a private pension plan. Twenty-four years later, there were 13 private pension plans in the country and in 1913, the federal government stepped in and began taxing pensions paid, stating they were similar to wages and therefore must be taxed.
Over the years, the government has set limits and added new regulations to ensure the continuity and effectiveness of retirement plans. Most people who are financially-savvy like to view the retirement plan contributions periodically. The best time to review is towards the end of a calendar year or the beginning of a new calendar year. This way, you can contribute more to your retirement plan, if you can afford it and have not reached your limits.
In December of 2015, the IRS announced that retirement-related items and limitations for pension plans for 2016 would remain the same. Some limitations have changed, however, including the elimination of a deduction for a couple’s income ranging from $184,000 to $194,000, and the limit of retirement savings contribution credit, which increased slightly for both married and singles. There are other changes that can be viewed at this link.
A good idea is to study the changes, as it may allow you to make additional contributions. However, note that some contributions need to be done within a certain timeframe. If you need help planning your retirement, call us. We will be more than glad to explain the complex intricacies of the system.
To give you a brief summary of the contribution limits and guidelines, here is a quick overview:
- There are two annual limits to contributions: traditional and safe harbor plans employee elective deferrals ($18,000) and overall limit on contributions. The limit on the SIMPLE is $12,500.
- Catch-up contributions for those over 50 are $6,000 for traditional and safe harbor plans and $3,000 for SIMPLE 401ks.
- These contributions must be submitted before the end of the year.
- Catch-up contributions can be made even if you are behind in your contributions.
- If you have several employees, you can treat the amounts as catch-up contributions.
- Your contributions cannot exceed your compensation, and there is a limit for 2015 and 2016 of $59,000, which includes catch-up contributions.
It is also important to note that if you withdraw excess deferral (2015) on or before April 15, 2016, it will be included in your 2015 gross income and will be taxed accordingly. If you withdraw the excess after April 15, 2016, it will be taxed twice –first when the contribution was made and then again when it was distributed.
As you can see, dates and deadlines are significant bits of information that can affect your retirement plan. This is why it is advisable to seek professional help in planning your retirement. An estate planning lawyer can help you sort out the different stages and deadlines so you maximize your wealth and enjoy your retirement without a single regret.
The estate lawyers of Krause Donovan Estate Law Partners, LLC practice law in the areas of Probate, Wills, Estate Planning, and Trusts. We assist clients in and around Madison, Wisconsin with all matters related to estate planning, trusts, and probate matters. Our dedicated attorneys will even make house calls if you are unable to come to our office.
Contact our office by calling (608) 268-5751 to schedule a free consultation or use our online contact form.