January is a great time to outline your financial goals for the year, including taking a look at your retirement savings plan. If you didn't save as much as you wanted to last year or you have yet to start contributing to a retirement account, there are some new rules for 2015 that you'll want to pay attention to.
For the most part, the updated guidelines are designed to work in favor of savers, although those who bring home bigger paychecks will have to contend with some changes to Social Security taxes. If you're mapping out your retirement strategy for the year, here's a rundown of the most important shifts to be aware of.
You'll be able to ramp up your savings in certain accounts
One of the biggest changes for 2015 has to do with how much you can save in your retirement accounts. If you've got a 401(k) or similar plan through your job, you can funnel up to $18,000 of your pay into your account, which is $500 more than last year. The total yearly contribution limit, including what your employer matches, goes up to $53,000.
If you're self-employed, that same limit applies if you're saving in a solo 401(k) or SEP IRA. The cap for SIMPLE plan savers is set at $12,500. If you don't have a plan at work, you can still put up to $5,500 in a traditional or Roth IRA.
Roth IRA eligibility will also expand
With a Roth IRA, you don't get the benefit of a tax deduction but plenty of workers prefer them because there's no tax on qualified withdrawals later on. Your income determines whether you can save in a Roth but the phaseout limits are climbing for 2015.
Married couples can max out their Roth if they earn $183,000 or less and the limit for single filers is set at $116,000. If you're moving money out of one IRA and into another, you'll only be able to do it once for the year; any more than that and you'll have to report it as a taxable distribution. The only exception is if you're transferring the money directly from one financial institution to another.
If you're looking to set up an IRA for 2015, now's a great time to do it. You can establish one through a brokerage or open an IRA CD online or at your local bank. An IRA CD is basically a certificate of deposit that comes with the same tax benefits as a traditional or Roth IRA. The contribution limits are the same and once the CD term expires, you can either renew it or roll the money over to another IRA. Interest rates are set to increase in 2015, so it's a perfect opportunity to bump up your retirement savings without taking on a lot of a risk.
High-income earners may have an easier time deducting contributions
One of the perks of saving for retirement in a traditional IRA is that you may be able to write off your contributions on your taxes. The only caveat is that you have to be within certain income limits to claim the deduction. Once your adjusted gross income or AGI goes past certain limits, the deduction gets phased out. Your adjusted gross income is what you earned for the year, minus your personal exemptions and any itemized deductions you claim.
For 2015, single filers won't be able to write off their IRA contributions once their AGI hits $71,000. The new limit is $1,000 higher than last year. Married couples will see the phaseout limit jump to $118,000 if you're covered by an employer's retirement plan and $193,000 if you don't have a plan at work but your spouse does.
But they'll pay more in Social Security taxes
Even though high-income workers are reaping some benefits in terms of higher phase out limits, they may still take a hit at tax time. The Social Security Administration increased the maximum income amount that's subject to get taxed for 2015.
The 6.2 percent tax now applies to the first $118,500 you earn, which is $1,500 more than last year. If you hit the upper income limit, the most you'll pay is $7,300. That figure jumps to almost $15,000 if you're self-employed.
More people will qualify for the Saver's Credit
The Saver's Credit is designed to get lower-income workers on the retirement saving bandwagon. Whether you qualify for the credit is based on your filing status and how much money you make. Some people who weren't previously eligible may be able to claim it going forward to the tune of up to $2,000, which can be a real boon at tax time.
Starting this year, single filers and married couples who file separate returns can claim the credit if they earn $30,500 or less. If you file as head of household, you can earn up to $45,750 to claim the credit, which is an increase of $750 over last year. Married couples who file jointly benefit the most, with the limit climbing by $1,000 to $61,000 for 2015.
There's a new savings option for some workers
Last year, the Treasury Department announced a new retirement savings option called the myRA for workers who needed a simplified way to set aside money for their future. The same contribution limits and deduction rules associated with Roth IRAs apply to the myRA plan, although the most you can put in over your lifetime is $15,000.
If you're thinking of signing up for a myRA, you'll want to check your income first. If you're single, you can only contribute if you make $129,000 or less and the limit goes to $191,000 for married couples.