Retirement Planning

2015 will bring COLAs, changes & something new. Each year, the retirement benefits landscape looks a little different, and next year is no exception. Here’s a look at what will change, what might develop, and even what won’t change for 2015.

The 401(k) contribution limit expands $500 to $18,000 next year. The catch-up contribution limit for plan participants 50 and older also rises by $500 to $6,000. If you are in the 25% tax bracket and put $18,000 in your 401(k) next year, you will save $4,500 in 2015 federal income taxes as a result. That tax savings comes with a regular 401(k), not the Roth version.

IRA contribution limits will stay the same, but phase-out ranges are changing. The contribution limit for Roth and traditional IRAs will again be $5,500 in 2015, with an additional $1,000 catch-up contribution allowed for IRA owners 50 and older.

Adjustments have been made to the phase-out ranges for the deduction of regular IRA contributions. If you own a traditional IRA and contribute to a retirement plan at work, you can claim a tax deduction for your traditional IRA contribution next year until your adjusted gross income is between $61,000-71,000 (single filers) and $98,000-118,000 (married filing jointly). Those ranges are respectively $1,000 and $2,000 higher than they were in 2014. If you own an IRA and don’t put money in an employer-sponsored retirement plan but your spouse does, you can claim a full tax deduction on traditional IRA contributions until your spouse’s AGI reaches the phase-out range of $183,000-193,000 in 2015.

The phase-out ranges regarding eligibility for Roth IRA contributions have also moved a bit north. In 2015, the ranges start $2,000 higher at AGIs of $116,000-131,000 (single filers) and $183,000-193,000 (married filing jointly).

Charitable IRA gifts may return (if not for 2015, then for 2014). On December 3, the House approved a 2014 tax extenders bill and sent it towards the Senate for a final vote. If it is made law – and Treasury Secretary Jack Lew says President Obama is “open” to approving such a short-term bill – it would reinstate 55 expiring tax credits retroactive to January 1, 2014.

Among them, according to USA TODAY: the IRA charitable rollover, the provision that permitted many IRA owners age 70½ and older the chance to donate up to $100,000 from their IRAs to public charities while excluding the donated amount from their gross incomes. (The enhanced deduction for contribution of appreciated property for conservation purposes – attractive to more than a few retired farmers – would also be put back into place.)

Social Security incomes will rise. A 1.7% COLA kicks in next year, and the maximum possible monthly benefit for those who claim Social Security at full retirement age increases $21 to $2,663. Social Security recipients younger than full retirement age at the end of 2015 will have $1 of benefits withheld for every $2 of income (AGI) they earn above $15,720. Recipients who reach full retirement age in 2015 will have $1 of benefits withheld for every $3 earned past $41,880. When you turn 66, Social Security doesn’t impose this withholding any longer.

America’s retirement program will also start sending out paper statements again, but only to those who haven’t created online accounts to track their earnings history and expected benefit. They will be sent annually to Social Security recipients older than 60.

Medicare premiums & deductibles are alternately rising & falling. The Part A hospital stay deductible grows $44 in 2015 to $1,260. The standard monthly Part B premium will still be $104.90 for 2015; the Part B deductible will still be at $147. As for Part D premiums, a joint study conducted by the Kaiser Family Foundation, Georgetown University and the University of Chicago sees them averaging $38.83 next year, about 4% higher. Part D deductibles will max out at $320 for 2015, though many Part D plans charge smaller deductibles or no deductibles.

Many retirement savers could get a bit more help. Eligibility limits for the saver’s credit (the federal tax break created to help offset part of the first $2,000 of voluntary contributions to IRAs and workplace retirement plans) are going up. In 2015, workers can claim the credit if their AGI is below $30,500 (single filers), $45,750 (heads of household) or $61,000 (married filing jointly). The credit can be as big as $1,000 for singles and $2,000 for couples.

We are also supposed to see the rollout of the myRA in January. This is a new retirement savings vehicle, basically a federally-backed Roth IRA whose value is guaranteed to increase over time (albeit not dramatically). Individuals with incomes under $129,000 and couples with combined incomes of less than $191,000 are eligible for myRAs; when the myRA turns 30 or when its balance reaches $15,000, the balance converts to a private-sector Roth IRA. (Accountholders can opt for that conversion prior to those conditions.) Annual myRA contribution limits are the same as for regular and Roth IRAs.