9 Changes That Will Affect Your Money in 2015
The MyRA will arrive, plus other tax and Social Security news
As 2015 approaches, I wanted to pass along nine changes that’ll affect your money next year so you can factor them into your financial plans:
1. You’ll be allowed to stash more money into some types of retirement plans. The maximum contribution limit for 401(k) and 403(b) employer-sponsored plans will rise by $500 to $18,000 if you’ll be under 50 and to $24,000 (a $6,000 catch-up) if you’ll be 50 or older. Those catch-up contribution boosts for people 50+ are overdue; the catch-up amount has been stuck at $5,550 for a few years.
Similarly, the maximum contribution for a SIMPLE 401(k) or a SIMPLE IRA — the type of plans often used by small companies — will also go up by $500, to $12,500 for those under 50 and to $15,500 (or a $3,000 catch-up) for those 50 and older.
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The news is better still for the self-employed or small business owners who plan to fund SEP IRAs or Solo 401(k)s in 2015: they’ll be allowed to invest $1,000 more than in 2014. The 2015 limit: a bountiful $53,000.
“In general, we prefer the SEP IRA to a Solo 401(k), because of its overall simplicity,” says Joshua Kadish, of the RPG Life Transition Specialists wealth management firm in Chicago, Ill.
2. You might finally be able to save for retirement through the Obama Administration’s new myRA option. Remember when the President announced this account (myRA, which rhymes with IRA, is short for “my retirement account”) in his 2014 State of the Union address? Well, it’s still not available, but will be — for some people — in 2015.
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The government is now working with a small group of employers participating in a pilot phase of the program. A U.S. Department of Treasury spokesperson told me: “Treasury looks forward to working with these employers to refine myRA before it becomes more broadly available in 2015.”
A myRA will be a no-fee Roth IRA for people whose employers don’t currently offer retirement plans. The federal government will guarantee myRA income (through special retirement savings bonds) and employee aftertax contributions will be made through payroll deductions. Contributions won’t be tax-deductible, but interest earnings will grow tax-free and withdrawals won’t be taxed. MyRAs will be limited to individuals with income below $129,000 and to couples with incomes under $151,000.
There’ll be a $15,000 limit on the amount you can accumulate in a myRA over 30 years; after that, the money must be transferred to a Roth IRA account managed by a financial services firm.
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“I’m not ready to say that everyone should jump on board for a myRA,” says Kadish. “There may be a benefit for having a tax deductible IRA instead, if you qualify. With a standard Roth IRA, you have 100 percent control over how the money is invested.”
3. Beginning in 2015, you’ll be limited on the number of nontaxable IRA rollovers you can make. The Internal Revenue Service will cap them to one every 12 months. The government is doing this to crack down on the loophole that let people effectively get short-term, interest-free loans by taking money out of their IRAs and then depositing the cash into new retirement accounts.
4. The income limit to claim the Saver’s Credit will rise a bit, too. In 2015, it’ll be boosted by $1,000 for married couples filing jointly (to adjusted gross income of $61,000) and by $500 for singles (to $30,500). This little-known credit lets qualifying taxpayers get a tax break for contributing to 401(k)s and IRAs.
5. The standard deduction will go up by $100 for singles (to $6,300) and by $200 for married couples filing jointly (to $12,600). As you likely know, you’ll be able to itemize your deductions if they’ll exceed the standard deduction.
6. There’ll be teeny increases in the personal exemption and the amount you can save in a Flexible Spending Account (FSA) in 2015. Both will inch up by $50: The personal exemption will be $4,000 (though it’ll phase out for singles whose incomes will be $258,250 or higher and for married couples filing jointly with incomes of $309,900 or more). The FSA limit rises to $2,500 next year.
7. The Alternative Minimum Tax exemption will go up by about 1.5 percent next year. The exemption amount will be $53,600 for individuals and $83,400 for married couples filing jointly.
8. Social Security payments will nudge up, but so will the amount of income subject to Social Security taxes. Benefits checks for the nation’s 58 million Social Security recipients will rise by 1.7 percent in 2015, due to the annual Cost of Living Adjustment. That amounts to roughly $22 a month, on average, according to AARP.
That 1.7 percent increase is a smidge higher than the coming 1.3 percent rise ($1,500) in the portion of income that’ll be subject to Social Security tax in 2015. The income ceiling will be $118,500, up from $117,000 in 2014.
9. The Obamacare penalty for not having health insurance in 2015 will more than triple. In 2014, the Obamacare penalty was $95 per adult or 1 percent of income, whichever was greater; in 2015, it’ll shoot up to $325 per adult or 2 percent of income.
What Will Be the Same in 2015
Two things that won’t change: the annual gift tax exclusion (still $14,000) and the limits for traditional and Roth IRAs (still $5,500 if you’re under 50 and $6,500 if you’re 50 or older).
“The lack of an increase in the IRA limits flies in the face of everything we’re hearing about people living longer and needing to save more,” says Kadish. “There’s no rhyme or reason to it.”