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Retirement Limits for 2007

Many people do spend time planning their contributions toward retirement. Certianly it would be better if more did.... Numbers are now announced for 2007. Some of the more common ones are listed below. That includes Social Security as well as private accounts.

Social Security The maximum amount subject to Social Security is increasing from $94,200 (for 2006) to $97,500 for 2007. The rate remains 6.2% for Social Security proper and 1.45% for Medicare. There remains no limit for the Medicare tax. (Unrelated, the Social Security Administration also announced a 3.3% increase in Social Security benefits for 2007.)
401(k)
and other
402(g) plans
The cost-of-living index met the requirements for an increase; this is now indexed for inflation rather than requiring Congress to adjust the limits. For 2007 the maximum contribution is $15,500. The "catch-up" provision remains at $5,000.
415(b)(1)(A) The limitation on these defined benefit plans increased from $175,000 (2006) to $180,000. For participants who separate from service before January 1, 2007, the limitation for defined benefit plans under Seciton 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2006, by 1.0334.
415(c)(1)(A) The limitation for these defined contribution plans is increased from $44,000 to $45,000.
401(a)(17),
404(l),
408(k)(3)(C),
408(k)(6)(D)(ii)
The annual compensation limit is increased from $220,000 to $225,000.
416(i)(1)(A)(i) The dollar limitation concerning the definition of a key employee in a top-heavy plan is increased from $140,000 to $145,000.

This is but a sampling of the retirement plan changes. More information is available from the IRS in IR-2006-162 dated October18, 2006.

"Tax software is no substitute for tax knowledge."

Any views expressed herein are based on our best information. The content of this web site was written as general information without specific individual information and thus may not apply in all situations. This material was not written, and cannot be used by the taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.

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Janelle Ogg, EA
Richard Ogg, EA