How Retirement Benefits Will Change in 2015
Social Security and Medicare will be making important changes to their programs next year. Individual retirement accounts and 401(k)s will also be tweaked in significant ways. Here's a look at the new features your retirement benefits will have next year.
Social Security. Social Security recipients will receive 1.7 percent bigger payments in 2015, due to the annual cost-of-living adjustment. Most workers will continue to pay 6.2 percent of their earnings into the Social Security system, but the maximum taxable earnings amount will increase next year from $117,000 in 2014 to $118,500 in 2015. The Social Security administration will also mail Social Security statements to workers turning ages 25, 30, 35, 40, 45, 50, 55 and 60 in 2015 who have not created an online account.
Medicare. The standard Medicare Part B premium will remain $104.90 monthly in 2015, although high-income beneficiaries pay more, and the deductible is unchanged at $147 per year. The Medicare Part A hospital inpatient deductible will increase from $1,216 in 2014 to $1,260 in 2015. Medicare Part D premiums vary by plan and are expected to increase by 4 percent to an average $38.83 in 2015, assuming retirees stick with their current plan, according to an analysis of Part D plans by researchers at Georgetown University, the University of Chicago and the Kaiser Family Foundation. The maximum possible Part D deductible will be $320 in 2015, but some plans may charge smaller deductibles or no deductible. "Some plans, including many of the most popular plans, are increasing their premiums next year," says Juliette Cubanski, a policy analyst at the Kaiser Family Foundation. "The open enrollment period is a good time to look to see whether the plan will continue to be offered next year and, if so, look to see how that plan might be changing in terms of the premiums you pay every month to be enrolled as well as the costs you pay for coverage, including the annual deductible and the costs that you pay for your prescription medications." Beneficiaries have an opportunity to switch Part D plans each year during open enrollment.
401(k)s. The 401(k) contribution limit will increase by $500 to $18,000 in 2015. The catch-up contribution limit for workers age 50 and older will also grow by $500 to $6,000 in 2015. "There's a considerable amount of tax deferral you can get on those savings," says Kevin Brosious, a certified financial planner and president of Wealth Management Inc. in Allentown, Pennsylvania. A worker under age 50 who is in the 25 percent tax bracket and contributes the maximum amount to a traditional 401(k) in 2015 will save $4,500 on his federal income tax bill, compared with a tax break of $4,375 for maxing out in 2014.
IRAs. The IRA contribution limit will remain $5,500 in 2015, and savers age 50 and older can contribute an additional $1,000 as a catch-up contribution. Workers who have a retirement account at work can claim a tax deduction for making a traditional IRA contribution until their modified adjusted gross income is between $61,000 and $71,000 for individuals and $98,000 to $118,000 for couples in 2015, up $1,000 and $2,000, respectively, from 2014. Spouses without a workplace retirement plan who are married to someone with a 401(k) can claim the IRA contribution tax deduction until their income is between $183,000 and $193,000 in 2015. The Roth IRA income limits will also increase by $2,000 in 2015 to between $116,000 and $131,000 for individuals and $183,000 to $193,000 for married couples. However, investors who earn more than these limits may be able to convert traditional IRA assets to a Roth IRA. "High-income employees typically aren't eligible for Roth IRAs, but they can add after-tax dollars and then roll that directly into their Roth IRA," says Michael Hollars, a certified financial planner for Client First Finance in Sunnyvale, California.
Saver's credit. Workers who save in a 401(k) or IRA may be eligible for the saver's credit if their AGI is less than $30,500 for singles, $45,750 for heads of household and $61,000 for married couples in 2015. These limits are between $500 and $1,000 higher than in 2014. This valuable tax credit is worth 50 percent, 20 percent or 10 percent of your 401(k) or IRA contributions up to $2,000 ($4,000 for couples), with the biggest credit going to savers with the lowest incomes. The maximum possible saver's credit is worth $1,000 for individuals and $2,000 for couples.
New retirement account. The Treasury is expected to offer a new type of retirement account, the myRA. These Roth accounts with be funded with after-tax dollars via payroll deduction, but they are not tied to your job and are guaranteed by the government to never lose value. The myRA will be available to workers with an annual income of less than $129,000 for individuals and $191,000 for couples, and they can use the account for up to 30 years or until their account balance hits $15,000, after which the balance will transfer to a private-sector retirement account.
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