Today, the Internal Revenue Service (IRS) announced the 2016 dollar limitations for retirement plan contributions and other retirement-related items based on its annual cost-of-living adjustments.
Many limitations will remain unchanged because, as the IRS explained, “the increase in the cost-of-living index did not meet the statutory thresholds that trigger their adjustment.” Accordingly, the elective deferral (contribution) limit for 401(k), 403(b), most 457 plans, and the government’s Thrift Saving Plan remains at $18,000. Likewise, the catch-up contribution limit for employees ages 50 and older who participate in these plans remains at $6,000. The limit on annual contributions to an Individual Retirement Arrangement (IRA) also remains unchanged at $5,500, with the catch-up contribution limit remaining at $1,000.
Some limitations will change based on the increase in the cost-of-living index. Those include increases to the adjusted gross income (AGI) phase-out range for taxpayers who make contributions to a Roth IRA and the AGI limit for a saver’s credit (otherwise known as the retirement savings contribution credit) for low- and moderate-income workers.