Due to the government’s estimate of low inflation, most of the limits are NOT CHANGING for 2016.

The Internal Revenue Service (IRS) highlighted the following limitations that WILL change in 2016 from 2015 levels:

• For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $184,000 and $194,000, up from $183,000 and $193,000, respectively.
• The AGI phase-out range for taxpayers making contributions to a Roth IRA is $184,000 to $194,000 for married couples filing jointly, up from $183,000 to $193,000. For singles and heads of household, the income phase-out range is $117,000 to $132,000, up from $116,000 to $131,000.
• The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $61,500 for married couples filing jointly, up from $61,000; $46,125 for heads of household, up from $45,750; and $30,750 for married individuals filing separately and for singles, up from $30,500.

Unchanged Limits

However, most limitations remain unchanged from 2015, including:

• The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $18,000, as does the limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3).
• The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) remains unchanged at $265,000.
• The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,000.
• The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500, and the additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
• The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations remains unchanged at $18,000.
• The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) remains unchanged at $210,000. For a participant who separated from service before Jan. 1, 2016, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2015, by 1.0011.
• The limitation for defined contribution plans under Section 415(c)(1)(A) remains unchanged in 2016 at $53,000.
• The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $170,000.
• The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5 year distribution period remains unchanged at $1,070,000, while the dollar amount used to determine the lengthening of the 5 year distribution period also remains unchanged at $210,000.
• The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains unchanged at $120,000.
• The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer remains unchanged at $6,000. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over also remains unchanged at $3,000.

Compensation Limits

• The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, remains unchanged at $395,000.
• The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $600.
• The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains unchanged at $12,500.

A complete list of the changes from the IRS is available here.

from InvestmentNews.com

Just speaking historically, seniors retiring now are facing a tough environment. At the time of your retirement, for better or worse, the current interest rates can have a dramatic impact on the longevity of your retirement savings.

Wade D. Pfau, a professor of retirement income in the Ph.D program in the financial service and retirement planning at the American College in Bryn Mawr, Penn. states that “people who otherwise plan and save in the same responsible way, those born at the right time will be fortunate to sustain a high level of spending over their retirements. Others will live and work at times that will result in less fortunate outcomes. Good fortune is derived from experiencing strong market returns in the years around the retirement date, and we have no control over what these returns will be.”

Wealth accumulation is certainly an important part of your retirement planning but even more important is the amount of spending which can be sustained by this wealth.

Dr. Pfau has created an index to help calculate whether or not your client is retiring in a good place or bad.

You can find more about him at his blog: http://wpfau.blogspot.com

He estimates that today’s retirees can only safely replace 38.9% of their pre-retirement salary using the accumulated assets in their financial portfolio. Extremely low interest rates, while helpful in some areas, are a problem in this calculation.

This replacement rate is down from a high of 105.2% in 2000 and up from a low of 33.1% in 2013.

This is definitely a challenging time to enter into retirement. That’s where you as a Financial Planner can truly shine! You can offer a number of ideas and strategies to make your client’s longevity of retirement savings reach it’s full potential!

Read more on this article at: http://tinyurl.com/oga49pu

Secrets for Successful Withdrawal

Sustainable income is a key factor in retirement planning.

Statistically, wealthier couples have a 43% chance that one of two spouses will live beyond age 95.
From 1969 to 1999 a portfolio of 60% equities & 40% bonds = avg. return of 11.48%
Unfortunately this comes with almost 0% returns over 12 years and 8% over the next 18 years.

Spending adjustments over time

Lifestyle spending slows between ages 70-84 with costs dropping as much as 30%
Higher inflation necessitates lower spending.

http://tinyurl.com/px4llwf