What’s new for retirement savings in 2017?

Posted by: Marie@Bicycle, Wednesday, Mar 01, 2017

Every year is the right year to save for retirement. Here’s what to know about saving in 2017. And don’t forget! It’s not too late to sock away some cash in your IRA if you haven’t already maxed out your contribution limit for 2016. You have until April 18 to contribute to your IRA this year.

Individual Retirement Accounts (IRA)

IRA contribution limits stay the same for 2017. As in 2016, you can stash away $5,500 plus an extra $1,000 if you’re 50 or older. Non-working spouses can have a Spousal IRA as long as your spouse earns enough to cover the contribution. So if you both want to max out your IRAs in 2017 and you’re both under 50, your spouse needs to earn at least $11,000.

The amount you can deduct for income tax purposes depends on your income and whether you have a retirement plan at work. Here are the limits if you have a retirement plan at work and if you don’t.

The income limits are increasing slightly for Roth IRAs: single filers with adjusted gross incomes less than $118,000 can contribute the full amount to a Roth IRA, with the contribution amount phasing out completely for those earning more than $133,000. Joint filers with incomes less than $186,000 can contribute the full $5,500, with the contribution amount phasing out for those earning more than $196,000.

Reminder: a traditional IRA defers income tax. You don’t pay tax on the money you save now, but you’ll pay tax on it when you withdraw it in retirement. (If you take the money out early, you will be taxed on it and pay a penalty fee.) A Roth IRA is the opposite: you save money after you’ve been taxed on it, but you’ll be able to withdraw it tax-free in retirement.

 

Employer Retirement Accounts (401(k), 403(b), 457, or Thrift Savings Plan)

The contributions for employer-based retirement savings accounts also stay the same for 2017. Like last year, you can save up to $18,000. If you’re 50 or older anytime in 2017, you can save an additional $6,000 for a total of $24,000.

Make it a priority to take advantage of these plans, especially if your employer offers any kind of matching funds. Don’t say no to free money!