New Limits set by IRS for 2015 Retirement Plan Contributions
Retirement plans run by IRS are reliable and good for one to secure its future well. Whether you talk about a government employee or about those who are self employed, IRS represents awesome retirement plan for all. Basically, contribution in a retirement plan includes the amount contributed by employer and employees that will be paid at the time of retirement. Every retirement plan comes with certain benefits and contribution limits. Know more about points related to the retirement plan –
Limits on retirement plans by IRS
Retirement plans by IRS are based upon limits of contributions done by employers and employees. Limits always depend upon the amount that can be contributed by the employee and employer but one thing to be important is that the plan must not exceed certain limit. On the basis of different plans, this limit can be different. For 2014 and 2015, the contribution limit is $5500 to $6500 for those whose’ age is 50 or more. On the other hand, income of the employee and filing status is also given a thought to set the limit of contribution for retirement plan.
Types of contributions for employers
According to the consent of the plan document, the employer can carry out matching contributions for employees who contribute elective deferrals such as 50 cents for every dollar contributed. Moreover, the retirement plan contribution can also be discretionary means contributions are done in some year and not in others according to the decision of the company.
According to the design of the plan document, the employer can choose something else than matching contributions for employees contributing elective deferrals. Prepared on behalf of all the employees who don’t prefer contribute elective deferrals, this is also a successful kind of contribution.
Elective deferral contributions
Employers mostly choose the kind of preparation that matches the contribution of employees who choose elective deferrals. This is a kind of pre tax employee contribution which is in general nothing but certain percentage of the compensation of employee.
Kinds of employee contributions
Like types of employer contributions, there are various kinds of employee contribution plans too for retirement planning. Here is the list of kinds of employee contributions –
Salary reduction contribution
Pre tax employee contributions based upon particular percentage of the employee’s salary, this one is in the midst of the most popular retirement plans. Also, there is a system of contribute fix amount of dollars per pay period.
After tax contribution
This kind of contribution is a compensation amount other than the Roth contribution. The employee needs to involve this in income on tax return.
Participants who are 50 year old or more can make catch up elective deferral contributions more than the basic limits on elective deferrals as per the permission by 401(k), 403(b), SARSEP and SIMPLE IRA plan.
IRS contributions cannot be made regular after the age of 70.5 but one can still continue the Roth IRA and making rollover further.
One more thing to know in this whole scenario is that you can contribute to a conventional or Roth IRA if you are covered by a retirement plan. In case you or your life partner is filled with an employer sponsored retirement plan and your earnings is more than certain limit, you cannot carry out deduction of the entire contribution.
On the other hand, if you and your spouse both are not covered from any retirement plan, you can choose full deduction. If you select conventional IRA plan, you will be able to deduct a fix limit of contribution.
So, this is all about 2015 retirement plans and contribution limit.
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