Have You Made Your Annual Retirement Plan Contributions?


Have You Made Your Annual Retirement Plan Contributions?

By Kyle Mostransky, LUTCF®, CLTC
Posted on December 22, 2016

Believe it or not, 2016 is coming to an end! Many of us are spending the final weeks of the year enjoying the holidays and getting ready for a fresh start in 2017. As you look ahead to a new year, don’t forget to analyze your financial situation and make sure you are taking full advantage of your IRA to save for retirement. While you have until April 17th, 2017 to make contributions for 2016, don’t wait until the last minute to max out your IRA.

IRAs are a powerful piece of your retirement strategy and your contributions add up over time. Before we reach the deadline, make sure you’re familiar with this tax year’s contribution limits.

2016 Contribution Limits

IRA contribution limits change every year or every few years to keep up with the cost of living. Since inflation has been low, the 2016 limit is the same as it was in 2015: $5,500. Remember, this limit applies to all of your Roth and traditional IRAs — not per IRA account.

Catch-Up Contributions

If you are age 50 or older, you can contribute an additional $1,000 to your IRA accounts, allowing you to contribute up to $6,500 for the year. The catch-up contribution is designed to help those closer to retirement age maximize their savings for retirement.

Roth IRA Limits and Backdoor Options

While the maximum contribution for IRAs is $5,500 per year (or $6,500 if you are over 50), Roth IRA contributions are phased out for those with high-modified adjusted gross income. For single filers in 2016, the income phase-out threshold begins at $117,000 and ends at $133,000. Within this range, you can only make a partial contribution, and once you hit $133,000, you cannot make a Roth IRA contribution. For married filers in 2016, the income threshold starts at $184,000 and ends at $194,000.

If your income is higher than the cutoff amounts, there are still a few ways you can contribute to a Roth IRA. One option is a backdoor Roth transaction, with which you first contribute to a traditional nondeductible IRA (available regardless of income), and then convert it to a Roth IRA. The IRS also allows you to convert after-tax contributions to a 401(k) into a Roth IRA.

Traditional IRA Tax Deductions

If you have a workplace retirement account, you can claim a tax deduction for your IRA contributions, so long as your income does not exceed certain annual limits. The phase-out range for single and head of household filers is between $61,000 and $71,000, and the range for married couples is between $98,000 and $118,000.

There are no income limits for those who do not have a workplace retirement account and file as a single or head of household. However, for joint filers, if one spouse does not have a workplace retirement account but another spouse does, the deduction is phased out for couples earning between $184,000 and $194,000.

Don’t be left scrambling in April…create a strategy now to max out your IRA for 2016 and you’ll benefit from your investment for years to come! At Mostransky & Associates, we are happy to answer your IRA questions and offer advice on how to make the most of your retirement savings vehicles. Contact us today at  631-425-9383 or emailing kyle@mostranskyfinancial.com.

About Kyle

Kyle Mostransky is the founder of Mostransky & Associates with more than a decade of experience providing retirement planning and insurance services. He specializes in helping successful business owners, families, and individuals grow, protect, and distribute their financial resources in a manner that’s in alignment with their objectives and values. Passionate about education and understanding the life insurance industry, he is a Life Underwriter Training Council Fellow (LUTCF®) and holds the Certified Long-Term Care designation (CLTC®). Based in Huntington, New York, Kyle serves clients throughout the greater New York City metropolitan area and across the country. To learn more, connect with Kyle on LinkedIn or visit www.mostranskyfinancial.com.