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401(k) Challenges

2017 Retirement Plan Contribution Limits and Rules

This year will see a limited number of changes to retirement plan contribution and income limits—check here to see how they may affect your plan options.

Articles by Alex Benke, CFP®

By Alex Benke, CFP®
VP of Advice and Investing, Betterment  |  Published: December 23, 2016

Every year, it's a good idea to review changes to your retirement plan contribution limits and laws. This checklist can help.

This year, there will be no changes to limits on employer and IRA plan contributions.

Roth IRA income limits increased to $118,000 for single investors, and $186,000 for married joint investors.

You may qualify for a "Saver's Tax Credit" on your 2016 retirement contributions if you make $62,000 or less (married) or 31,000 or less (single).

Every year, it’s a good idea to review changes to your retirement plan contribution limits and laws.

After all, contribution limits and laws change annually, so it’s a good idea to stay on top of the differences from year to year that can benefit you annually, as well as long-term.

This year will see a limited number of changes to retirement plan contribution and income limits. To make the most informed retirement and investment decisions this year, get informed about what’s changing.

Here’s the checklist you can go through to help you see what’s staying the same or changing across retirement plan rules and limits for 2017. (Note: Betterment is not a tax advisor, and this should not be considered tax advice. You should contact a tax professional to discuss your individual situation.)

1. Not Changing: Employer Plan Contribution Limits

This year, taxpayers will be able to contribute up to $18,000 to their 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan. The catch-up contribution limit will remain at $6,000 for a total contribution limit of $24,000 for employees 50 years old and older.

2. Not Changing: IRA Contribution Limits

The limit on annual contributions to an IRA remains unchanged at $5,500. The additional catch-up contribution limit for individuals 50 years old and over is not subject to an annual cost-of-living adjustment, and remains $1,000.

3. Increase: Income limits for Deductible IRA Contributions

The deduction for taxpayers making contributions to a traditional IRA is phased out for those who have modified adjusted gross incomes (AGI) within a certain range.

Income limits for deductible contributions to IRAs vary based on whether the taxpayer and/or the spouse are eligible to participate in an employer-sponsored retirement plan.

Single/Head of Household

For singles and heads of household who are covered by a workplace retirement plan, the income phase-out range increases to $62,000 to $72,000.

Married

For married couples filing jointly, if the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range increases to $99,000 to $119,000. If the IRA contributor is not covered by a workplace plan but the spouse is, the income range increases to $186,000 to $196,000.

For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains at $0 to $10,000.

Remember, if you and your spouse are not covered by a workplace retirement plan, you can always deduct your traditional IRA contributions.

For more information and guidance regarding income limits for deductible IRA contributions, consult the expanded IRS rules.

4. Increase: Income Limits for Roth IRA Contributions

Single

For singles and heads of household, the income phase-out range is $118,000 to $133,000, an increase of $1,000 for 2017.

Married

The AGI phase-out range for taxpayers making contributions to a Roth IRA is $186,000 to $196,000 for married couples filing jointly, up from $184,000 to $194,000.

The AGI phase-out range for a married individual filing a separate return (but lived with his or her spouse at any time during the year) who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

You can both contribute to your own traditional and Roth IRAs, but each of you can only contribute a maximum of $5,500 (or $6,500 if you’re 50 or older) across both accounts in 2017. This limit is unchanged from 2016. For more information, read the IRS guidelines.

5. Increase: Income Limits for Saver’s Credit

The AGI limit for the saver’s credit for low- and moderate-income workers increases in 2017 to:

  • $31,000 for married individuals filing separately, and for singles, up from $30,750
  • $46,500 for heads of household, up from $46,125
  • $62,000 for married couples filing jointly, up from $61,500

Change In Contribution Limits

Type 2016 2017 Increase
Limit on employee contributions to 401(k), 403b, or 457 plan $18,000 $18,000 None
Limit on age 50+ catchup contributions to 401(k), 403b, or 457 plan $6,000 $6,000 None
Traditional and Roth IRA contribution limit $5,500 $5,500 None
Traditional and Roth IRA age 50+ catchup contribution limit $1,000 $1,000 None
SIMPLE 401(k) or SIMPLE IRA contributions limit $12,500 $12,500 None
SIMPLE 401(k) or SIMPLE IRA age 50+ catchup contributions limit $3,000 $3,000 None
Maximum annual additions to all defined contribution plans by the same employer $53,000 $54,000 $1,000
Highly Compensated Employee definition $120,000 $120,000 None
Deductible IRA income limit, active participant in workplace retirement plan, single $61,000 – $71,000 $62,000 – $72,000 $1,000
Deductible IRA income limit, active participant in workplace retirement plan, married filing jointly $98,000 – $118,000 $99,000 – $119,000 $1,000
Deductible IRA income limit, spouse is active participant in workplace retirement plan $184,000 – $194,000 $186,000 – $196,000 $2,000
Roth IRA income limit, single $117,000 – $132,000 $118,000 – $133,000 $1,000
Roth IRA income limit, married filing jointly $184,000 – $194,000 $186,000 – $196,000 $2,000

As a Betterment investor, Betterment’s RetireGuide, which is our retirement planning tool, has been updated to include the 2017 contribution rules and limits.

To get personalized advice on which employer plan or IRA accounts you qualify for and may want to use to help optimize your taxes, check out the How to Save section of RetireGuide.

If you’d like to preview a simplified version of RetireGuide’s account recommendations, try this calculator:

Betterment is not a tax advisor, nor should any information contained herein be considered tax advice. Please consult a tax professional.

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This year will see a limited number of changes to retirement plan contribution and income limits—check here to see how they may affect your plan options.

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