Many of us have pension plans. However, we don’t give them much thought until we get closer to retirement age. Unfortunately, many of us aren’t putting away enough for retirement. Often, people are forced to work past retirement age in order to get by. For the next generation, there is more at stake–the potential loss of Social Security. This means many people won’t be able to live on their pension alone.
IRS Announces 2017 Pension Plan Limitations
You can deduct contributions to traditional IRAs if you meet certain conditions. If the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced or even phased out. This depends on filing status and income. Below you will find the phase-out limits for 2017:
- Single taxpayers covered by a workplace retirement plan will have a phase-out range of $62,000-$71,000.
- Married couples filing jointly where the spouse making the contributions to the workplace retirement plan will have a phase-out range of $99,000-$118,000.
- For somebody who contributes to an IRA without having a pension plan through work and is married to somebody who is covered, the deduction is phased out if their joint income is between $186,000 and $196,000.
- Finally, for married couples who file individual separate returns covered by a workplace pension plan, the phase out range is not subject to an annual cost of living adjustment. Their phase-out deductions remain from $0-$10,000.
Income Phase-Out Ranges for Roth IRA Contributions
Roth IRAs are different in their phase-out ranges with the IRS. For taxpayers contributing to a Roth IRA, the phase-out range is between $118,000 and $133,000 for singles and heads of household. Married couples who file jointly have a phase-out range of $186,000-$196,000. Taxpayers who are married and filing separately do not qualify for a cost of living adjustment.
The saver’s credit is typically for lower to middle income families, also known as the retirement savings contribution credit. The phase-out limits are $62,000 for married couples filing jointly, $46,500 for heads of household, and $31,000 for singles and married couples filing separate returns.
What Does it All Mean?
Basically, you can qualify for tax deductions by putting into a retirement plan. By setting aside the maximum amount per year, you lower your taxable income. Not only are you lowering your taxable income, but you are also contributing to your retirement income. Overall, it’s a win-win. As you get closer to retirement age, you may find yourself puzzled that the money you’ve been stashing away to fund your golden years may not get you as far as you’d hoped. Oftentimes people in this situation end up working longer or taking on another job. However, contributing more to your pension plan can help you lower your tax bill. It also has the added benefit of lining your nest-egg.