When we started drafting this post a month ago, we were JUST focusing on 401(k) plans. But that wouldn’t be fair to everyone else…so here’s a fresh look at what’s new for 2015.
Have you filed your taxes yet? We did over here at HQ, and it was a pretty painless experience – as we planned for as little as possible in a return, living the mantra “don’t let Uncle Sam borrow your money interest-free.” During that process, we thought about whether we should be making a retroactive contribution to our 401(k) plan – but we decided against it. We’ll aim for the maximum in 2015, though, and we thought we’d share some 401(k) strategies for 2015 with you. (And 403(b), 457…well, a whole bunch of plans!)
What are the 2015 contribution limits?
First of all, you should be maxing out if at all possible – experts say, though, that having the emergency fund taken care of is the thing to focus on first, so make sure you have your priorities down. But…if you can max out, here’s how much you can contribute out of your own pocket in 2015:
- 401(k), 403(b), 457, and Thrift Savings Plans: $18,000.
- “Catch-up” contributions – if you’re 50 and over – for the above plans: $6,000 (in addition, of course, to the $18,000)
- IRAs and Roth IRAs: $5,500
- Catch-up contributions for IRAs and Roth IRAs (again, age 50+): $1,000
- Solo 401(k): $53,000
- Catch-up contributions for Solo 401(k)s: $6,000
- Simplified Employee Pension: $53,000
[FOLKS: Those Solo 401(k) and SEP plan numbers are HUGE! We’ll devote a future post to that subject. Wow.]
These limits might mean you have to do some planning to stay on track, and if you plan on maximizing every cent you have going toward retirement. And there is some tax-timing to think about, too…
Can I still contribute toward last year?
Yes, you can – you have until April 15 (check with your tax advisor or accountant, as we’re not responsible for what you do here). If you fall into the “we’re getting a huge refund” category, may want to look at the IRA or Roth IRA as an avenue to lower your tax burden even further.
The limits are a little lower than the above (save for IRA and Roth IRA contributions and catch-up contributions, which didn’t vary year-over-year), but if you’re not close to that number for 2014 and it’s possible to contribute by the April 15 deadline AND still stay on track for 2015, this can be a good move to consider.
What about the company match?
IMPORTANT. VERY IMPORTANT.
You don’t want to leave money on the table – and the company match is like getting free money. We’ve seen generous matches and we’ve seen okay matches – but even if you’re at a company that only puts 2% in if you put 6% in: that’s free money. (Well, not “free,” since you are…working.)
Why should I invest in the 401(k) anyway?
It’s a really good habit to get into, in our opinion. If you get started as soon as you can – waiting of course until you are eligible if, say, you start a new job – then you’ll be used to a lower paycheck and, if you plan accordingly, will not really miss the money.
And, what do I invest IN?
Oy. We’re not registered investment advisors or stock brokers; we don’t have our Series 7. So we’re not going to begin to go there.
Advice seems to be all over the map, too: for every person who says you should ride the wave of the S&P 500’s phenomenal growth, there’s another who says the sky is falling and what goes up must come down. Index funds, mutual funds, value funds, stable value funds…it can be a dog’s breakfast to some.
Consult a professional.
So what’s the point of this post?
To be more than a gentle reminder – to be a whack upside the head. Take advantage of the tax-favored retirement plans at every corner. It’s smart to do.
