Annual IRS and SSA Adjustments
Written by: Martin Shields
Every year in October the Social Security Administration (SSA) comes out with the cost of living adjustments in Social Security benefits and the IRS comes out with updated retirement plan benefit limit. Both of these announcements become effective on January 1 of the following year. For 2015, Social Security beneficiaries will receive a 1.7 percent cost-of-living adjustment in their monthly payments in 2015 following a 1.5 percent increase this year. This adjustment is based on the federal government’s calculation of inflation over the past year and it has been below this long-term historical average over the past 6 years. Although these amounts may not seem large when viewed year by year, when you take the combined effect of multiple annual increases it does help retirees protect themselves against rising prices.
The SSA also announced that effective Jan. 1, 2015, the annual maximum amount of earnings subject to Social Security taxes will increase by $1,500 to $118,500. The increase is based on the gain in workers’ average wages over the past year.
The table below highlights some of the changes to retirement plan benefit limits for 2015. The first two items listed increase the maximum amount contributed by an employee to a 401(k) plan to $24,000 from $23,000. The third item listed shows the total amount that can be contributed to a profit sharing and 401(k) plan. For 2015 that amount will increase by $1,000 to $53,000. This amount does not include the annual 50+ catch up amount.
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