By John “Jack” Kiley, CPA, PFS, CISP / Partner
MidAtlantic IRA, LLC
Self Directed Retirement Plan Solutions
As 2010 is comes to a close, we all begin to look ahead to 2011. For retirement plans, the landscape in 2011 will look much like 2010. The new contribution limits largely remain unchanged. In calculating these, IRS compares the official cost of living increase from September of 2010 to September of 2009. Because, at least officially, the cost of living was higher in 2009 than in 2010, all indexed (for inflation) contributions, limitations, thresholds, etc in the IRS will remain at 2010 levels.
Below is a table of 2010 and 2011 contribution limits:
|IRAs (Traditional & Roth)||$ 5,000|
|IRA catch up||$ 1,000|
|SEP min coverage||$ 550|
|SIMPLE elective deferral||$ 11,000|
|401k elective deferral||$ 16,500|
|401k catch up||$ 5,500|
|Max Defined Contribution Plan limit
(before catch up)
In reviewing these limits, some definitions and rules need to be kept in mind.
With Traditional IRAs, contributions can only be made to the extent you have earned income up to the maximum allowed in the table above. Earned income is defined as W-2 income or earning subject to self employment. There are other qualifiers which we will not discuss here. (examples: if you have W-2 wages of $50,000 you may contribute $5,000. If you have W-2 wages of $3,000, you may only contribute $3,000). Also, you may not contribute after you reach the age of 70 ½.
Please keep in mind these are contribution limits-not deductible amounts. It is possible to make a nondeductible Traditional IRA contribution which will be discussed in a future article.
Roth IRAs follow similar rules with one big exception. For married couples, if your Adjusted Gross Income is greater than $169,000 then your contribution will be limited and once your AGI rises above $179,000 you be precluded from contributing to a Roth (For singles the contribution phase out begins at $107,000 and the contribution is fully eliminated at $122,000).
With both Traditional and Roth IRAs taxpayers older and 50 ½ may contribute an additional $1,000.
The minimum SEP (Self Employed Pension) coverage begins for employees earning at least $550. What this means is that Employers who maintain a SEP plan must contribute for employees earning more than $550 per the plan calculation.
An elective deferral is the amount of earnings an employee ‘elects’ to contribute to their respective plan maintained by the employer. The elective limits remain unchanged for both SIMPLE Plans ($11,500) and for 401k, 403b, and Government plans ($16,500).
Catch up contributions for SIMPLE Plans ($2,500) and other Qualified Plans ($5,500), again remain at their 2010 levels for 2011.
This is a brief overview of the contribution limits to the plans that the majority of Americans maintain. For questions regarding your particular plan, you should contact your plan administrator or feel free to contact us at 800/607.0145 x201.
Jack Kiley, CPA, PFS, CISP Partner, MidAtlantic IRA, LLC and John Kiley CPA, LLC
Jack Kiley brings to the table over 25 years of experience in public accounting. He has extensive knowledge in developing tax, retirement and financial planning strategies for high net worth individuals along with closely held businesses and has a reputation for “speaking in plain English” regarding complex concepts. Groups regularly engage him to speak about these topics especially “How to Self-Direct Your IRA.” His specialty knowledge makes him the expert to turn to particularly when a complex scenario is needed for the purchase of real estate, mortgages, leases and other cash flows that the IRS allows in an individual retirement plan. Jack Kiley a Certified Public Accountant (CPA) is also credentialed as a Personal Financial Specialist (PFS) and a Certified IRA Services Professional (CISP).