Retirement Plan Contribution Limits for 2016 The Treasury Department recently announced inflation-adjusted figures for retirement account savings for 2016. The table below compares the 2016 dollar limits with the last two years.
|Plan Limits for Plan Year||2016||2015||2014|
|401(k), 403(b), 457 Elective Deferral Limit||$18,000||$18,000||$17,500|
|Catch-Up Contribution Limit||$6,000||$6,000||$5,500|
|Annual Compensation Limit||$265,000||$265,000||$260,000|
|Defined Contribution Limit||$53,000||$53,000||$52,000|
|Defined Benefit Limit||$210,000||$210,000||$210,000|
|Definition of Highly Compensated Employee||$120,000||$120,000||$115,000|
|Taxable Wage Base||$118,500||$118,500||$117,000|
|IRA Contribution Limit||$5,500||$5,500||$5,500|
|IRA Catch-Up Contributions||$1,000||$1,000||$1,000|
Retirement may seem abstract and far in the future at this stage in your life. However, preparing now for retirement is crucial, and the sooner you get started the better. The biggest advantage to starting young is time. If you put $1,000 into an IRA each year from age 20 to age 30 (11 years), and the account earns 7 percent annually, you will have $168,514 in the account when you retire at age 65. If you don’t start until age 30, but save $1,000 each year for 35 years straight earning 7 percent annually, your account would grow to only $147,913.
Saving for retirement may seem like a strain on your budget right now, but you can start small and grow. Even setting aside a small portion of your paycheck each month will pay off in big dollars later. By starting young, you also can afford to invest more aggressively since you have years to overcome the inevitable ups and downs of the stock market. Developing the habit of saving for retirement now will make it easier to continue saving throughout your working years. As always, please call BHS with any questions.