By Anne Shim, Mason and Associates

As we approach the end of 2016, many of us are enjoying the holidays and getting ready for a fresh start in 2017. But before you turn your focus to the new year, take a moment to analyze your finances and make sure you are taking full advantage of your retirement accounts in 2016. While you have until April 17th, 2017 to make contributions for 2016, don’t wait until the last minute to max out your plans.

IRAs and 401(k)s are a powerful element of your retirement strategy and your contributions add up over time. Before we reach the deadline, make sure you’re familiar with this tax year’s contribution limits.

2016 Contribution Limits

Contribution limits change every year or every few years to keep up with the cost of living. Since inflation has been low, the 2016 IRA limit is the same as it was in 2015: $5,500. Remember, this limit applies to all of your Roth and traditional IRAs — not per IRA account. For your 401(k), you can contribute up to $18,000, which works out to $1500 a month.

Catch-Up Contributions

If you are age 50 or older, you can contribute an additional $1,000 to your IRA accounts for a total of $6500 and $6000 to your 401(k) to add up to $24,000. The catch-up contribution is designed to help those closer to retirement age maximize their savings for retirement.

Employer Matching

If you wish you could contribute the maximum to your 401(k), but it just won’t work for your budget, work to take advantage of your employer’s fund matching policy. For example, if your company matches up to 5% of your pay, make sure you are contributing at least that much.

Roth IRA Limits and Backdoor Options

While the maximum contribution for IRAs is $5,500 per year (or $6,500 if you are older than 50), Roth IRA contributions are phased out for those with high-modified adjusted gross income. For single filers in 2016, the income phase-out threshold begins at $117,000 and ends at $133,000. Within this range, you can only make a partial contribution, and once you hit $133,000, you cannot make a Roth IRA contribution at all. For married filers in 2016, the income threshold starts at $184,000 and ends at $194,000.

If your income is higher than the cutoff amount, there are still a few ways you can contribute to a Roth IRA. One option is a backdoor Roth transaction. You first contribute to a traditional nondeductible IRA, which is available regardless of income, and then convert it to a Roth IRA. The IRS also allows you to convert after-tax contributions to a 401(k) into a Roth IRA.

Traditional IRA Tax Deductions

If you have a workplace retirement account, you can claim a tax deduction for your IRA contributions, so long as your income does not exceed certain annual limits. The phase-out range for single and head of household filers is between $61,000 and $71,000, and the phase-out range for married couples is between $98,000 and $118,000.

There are no income limits for those who do not have a workplace retirement account and file as a single or head of household. However, for joint filers, if one spouse does not have a workplace retirement account but another spouse does, the deduction is phased out for couples earning between $184,000 and $194,000.

Don’t be left scrambling in April – create a strategy now to max out your retirement plans for 2016 and you’ll benefit from your investment for years to come! We are happy to help answer your retirement questions and offer advice on how to make the most of your retirement savings vehicles. Give our office a call at (323) 254-3072 or email us at This email address is being protected from spambots. You need JavaScript enabled to view it. to schedule an appointment.

About Mason & Associates, Inc.

Mason & Associates, Inc. was founded in 1989, specializing in Life Planning for individuals, families and small businesses. Life Planning places a person’s core life values at the heart of the advice process and focuses on the human aspects of financial planning. The result is a truly different type of wealth management experience. We serve as a financial coach, so that when our clients need to make an important decision, they have someone they trust to guide them. We don’t sell products; we create solutions that work in concert to help you reach your goals. Mason Life Planning puts your dreams at the heart of your financial plan.