John R. Bullis: 2015 retirement contributions are increased
November 18, 2014
One of the best investments is the money you save in a retirement account. Whether it is the salary deferral savings at work or the IRA contribution or some other retirement account contribution does not matter. Whatever you save will be a benefit to you or your heirs in the future.
Because Congress has indexed some of the retirement contribution amounts to inflation, the allowable amounts in 2015 are increased (in most cases).
The regular IRA and ROTH IRA qualified contributions are not changed in 2015, they remain at $5,500. Plus the catch-up if age 50 at the end of the year remains at $1,000.
The deferred compensation plans of state and local governments and tax exempt organizations increases from $17,500 in 2014 to $18,000 in 2015. The catch-up for 401(k) and those plans increases from $2,500 in 2014 to $3,000 in 2015.
The SIMPLE plan maximum amount of compensation an employee can elect to defer increases from $12,000 in 2014 to $12,500 in 2015. And the catch-up (for individuals age 50 or over) increases for the SIMPLE plan from $5,500 in 2014 to $6,000 in 2015.
If you work where the employer pays some matching contribution, try to at least defer enough of your salary or wages to get that matching contribution.
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Whatever you have in retirement accounts, it won't do much good if you don't have it invested properly. A lot of folks are worried or at least concerned about the U.S. economy, the world economy and all the problems in the world. However a lot of experienced financial advisors say not being invested can be the biggest mistake.
Why not meet with a financial adviser to help you decide your risk tolerance and what investments might be done and still let you sleep at night?
If a young person has some wages they earned in 2014, they are eligible to do an IRA or ROTH IRA contribution. If they earned $2,000 in 2014, then the contribution is only $2,000. It can't be more than their earned income (wages and self employed profits) and it can't be more than the maximum allowable contribution. But if a parent or grandparent or uncle or aunt wanted to make a gift to that young person, maybe the contribution could be done for really long term savings. It might encourage more savings in the future. There is no tax deduction for doing a gift, but still great to do.
To make a retirement plan contribution means living on a little less than total earnings. But the income tax deduction helps and living on less may not be a bad thing in the long run according to Ben Franklin.
Did you hear? "Even a short pencil is more reliable than the longest memory".
John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.