4 Changes to Retirement Plans You’d Better Know About for 2015

December is the time of year when 401(k) and IRA participants take a harder look at those retirement savings plans, and this year that review should include a host of mandates and initiatives coming to retirement savings plans for 2015.

For example, yearend is often the time plan participants hear about changes to plan contribution limits but ignore them just the same. It’s a syndrome financial planners see all the time.

“Too often I see people who haven’t been maximizing their contributions simply because they didn’t know that the limits had been adjusted,” says Joshua Kadish, of RPG Life Transition Specialists, a holistic wealth management firm in Chicago. “At yearend, we want everyone to know what the fine print says so they can make educated decisions.”

With $23 trillion in total U.S. retirement plan assets as of Dec. 31, 2013, according to the Investment Company Institute, too much cash is at stake not to pay attention to changes.

What’s on tap? Here’s a rundown from RPG:

“My” way. There’s a brand-new IRA option available in 2015 called the “myRA,” which is not linked to any employer-sponsored plan. Akin to a Roth IRA, the myRA is an option for Americans with individual income of less than $129,000 annually and allows workers to contribute after-tax dollars through payroll deduction, Kadish says.

Bump in 401(k) contribution limits. Next year will also bring with it a $500 rise in 401(k) contributions over this year. If you’re 50 or older, you’ll get another $500 contribution “raise.” Kadish says if you’re eligible, you should take advantage of both $500 hikes. “Maximizing your contributions allows your investments to grow more over time and decreases your income tax bill,” he says.

A Social Security raise too. Retirees will earn a 1.7% cost-of-living pay raise via their Social Security benefits next year. As usual with the U.S. government when it comes to tax liabilities, there is a caveat. “The portion of your income that is subject to Social Security tax will also raise $1,500, or about 1.3%,” Kadish notes.

Low-income savings credit. Americans who earn less than $30,500 annually and are single: You may be eligible in 2015 for a tax credit valued at $1,000, up from $500 this year. You can stash the cash, tax free, in your 401(k) plan or IRA.

All in all, the changes give you that much more of an opportunity to invest in your financial future. “These programs are always changing and evolving, and we’re seeing this with the new myRA option,” Kadish says. “If there’s one New Year’s resolution you commit to this year, it should be to understand where your money is going so you can feel safe and secure about your retirement future.”

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