Low inflation may be great for consumers, but it's not doing savers any favors. That was made clear again recently when the IRS announced retirement plan contribution limits for 2016.
The maximum you can put into 401(ks), IRAs and plans for the self-employed will remain the same as in 2016. The IRS announced small increases in income limits for contributing to Roth IRAs, claiming the saver's credit and getting deductions for regular IRAs when your spouse is covered by a workplace plan.
Here's what you need to know:
Workplace plans. The contribution limit for 401(k)s, 403(b)s, the federal government's Thrift Savings Plan and most 457 deferred-compensation plans is $18,000, the same as in 2015. The catch-up contribution for people 50 and over also stays at an additional $6,000.
IRAs. The last time the contribution limit increased was in 2013, when it rose to $5,500, which is where it remains for 2016. The catch-up contribution is also static at an additional $1,000.
Deductible IRAs. You can deduct your IRA contribution without regard to income limits if you aren't covered by a workplace plan. If you are, your deduction phases out with modified adjusted gross incomes between $61,000 and $71,000 for singles and heads of household, the same as 2015.
For married couples filing jointly where the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range also remains at $98,000 to $118,000.
For contributors who aren't covered by a workplace plan, but who are married to someone who is, the deduction phase-out ranges from $184,000 to $194,000, up from $183,000 to $193,000 this year.
Roth IRAs. The amount you contribute remains the same as for other IRAs: $5,500, with a $1,000 catch-up for those 50 and older. Your ability to contribute phases out at $184,000 to $194,000 for married couples filing jointly, up from $183,000 to $193,000 this year. The phase-out range is $117,000 to $132,000 for single people and heads of household, up from $116,000 to $131,000 this year.
Self-employed and small-business plans. Contribution limits for SEP IRA or a solo 401(k) are unchanged at $53,000 for 2016. The limit on SIMPLE retirement accounts stays at $12,500 for 2016, with a $3,000 catch-up -- again, same as this year. The maximum annual benefit for traditional, defined-benefit pensions remains at $210,000.
The saver's credit. The AGI limits for this retirement savings contribution credit rose $500, to $61,500, for married couples filing jointly; $375, to $46,125, for heads of household; and $250, to $30,750, for married individuals filing separately and for singles.
Unfortunately, many lower- and moderate-income Americans don't realize this credit exists to help them save for retirement, said Amy Wang, senior technical manager for the American Institute of CPAs. The credit can shave $200 to $2,000 off a tax bill, depending on your AGI and filing status.
People who would benefit "don't know what's available to them," Wang said, "so it's passed up."