An integral part of our planning for clients we keep a close watch for new thresholds that affect pension plan contributions, Social Security taxation and Medicare premiums.
Listed below are the figures for 2011 which show that there have been no changes in retirement plan contribution limits for the 2011 tax year.
2011 Pension Plan Contributions
|401(k), 403 (b) and 457 Plans||No changes|
|Maximum annual contribution to 401 (k), 403 (b) and 457 Plans||$16,500|
|Catch-up contribution for those age 50 and over||$5,500|
|Max for those age 50 and over||$22,000|
|IRAs-Roth and Contributory||No changes|
|Maximum annual IRA Contribution||$5,000|
|Catch-up contribution for those age 50 and over||$1,000|
|Max for those age 50 and over||$6,000|
|SIMPLE (Employee Deferral)||No changes|
|Max for those age 50 and over||$14,000|
|SEP-IRA (No changes)||$49,000|
If you are covered by any of the above plans, and can maximize your contributions, we recommend that you visit with your employer’s Benefits Department and take full advantage of these tax-deferred savings.
There will be no cost-of-living adjustments in Social Security benefits in 2011 since there was virtually no increase in the Consumer Price Index (CPI-W) from the third quarter of 2008 (the last year COLA was determined) to the third quarter of 2010. Therefore, under existing law, there can be no COLA in 2011.
The age at which one can collect full benefits is also increasing. For those born in 1941, full retirement is age 65 years and 8 months; for those born in 1942, it’s 65 years and 10 months. For those born between 1943 and 1954, full retirement age is 66. For those born in the years 1955 to 1959 the basic retirement age is 66 plus additional months depending on birth year. Full retirement age will gradually increase to age 67 for those born in 1960 and later.
Please note: If you decide to delay the receipt of your Social Security benefits until after age 65, you should still apply for Medicare benefits within three months of your 65th birthday. If you wait, you may pay more for your Medicare Part B (medical insurance) and Medicare Part D (prescription drug) coverage.
Retirement earnings tests are imposed on individuals who are working and collecting Social Security benefits. The figures for 2011 remain unchanged from 2010. The maximum amount of earnings to still receive full benefits is as follows:
1) Full retirement age: No limit on earnings
2) Year full retirement age is reached: The earnings limit is $37,680. For every dollar earned over this threshold, $1 in benefits will be withheld (or taxed) for every $3 you earn above that amount.
3) If you are under full retirement age, your earnings limit is $14,160. One dollar in benefits will be withheld (or taxed) for every $2 earned in excess of the threshold.
Part B Medicare premiums (medical insurance) have been revised for 2011. Most beneficiaries who currently have the Social Security Administration (SSA) withhold their Part B premiums and have incomes of $85,000 or less ($170,000 for joint filers) will not see an increase in their Part B premium for 2011. It will remain $96.40 if you had SSA withhold the Part B premium in 2009 and $110.50 if the beneficiary was new in 2010 and had SSA withhold Part B. For all others (new recipients) the standard Medicare Part B monthly premium will be $115.40, which is a 4.4% increase over the 2010 premium.
Below is a table showing premiums relative to modified adjusted gross income (MAGI). Note that fewer than 5% of those on Medicare are affected by higher premiums.
|MAGI Rangefor single taxpayer||MAGI Rangefor couples filing jointly||Part B Cost|
|$85,000 or less||$170,000 or less||$115.40|
|Above $214,000||Above $428,000||$369.10|
As always, if you have any questions regarding your financial planning, please do not hesitate to give us a call. We’ll be happy to help you.