Last week the Internal Revenue Service announced it’s 2008 inflation adjustments to its tax code. A number of these changes will impact how much you will be able to save for your retirement. Generally you will be able to contribute more to your pension and retirement plans than in previous years. However it is also important to note that a number of key figures remain unchanged, including the maximum annual contribution to a 401(K) plan which will stay at $15,500. For individuals over 50, the maximum additional contribution will also remain unchanged at $5,000.

Key Changes

1. “The income limit for the savers credit is $53,000 for joint filers (up $1,000), $39,750 for heads of household (up $750) and $26,500 for singles and married persons filing separately (up$500). Low-and moderate income workers who contribute to a retirement plan, such as an IRA or 401(k), may qualify for the credit, which is available in addition to any other tax savings that apply.”

2. “The contribution amount allowed for Roth IRAs begins to phase out for joint filers with incomes exceeding $159,000 (up from $156,000) and $101,000 (up from $99,000) for singles and heads of household.”

3. “For contributions to a traditional IRA, the deduction phase-out range for an individual covered by a retirement plan at work begins at income of $85,000 for joint filers (up from $83,000) and $53,000 for a single person or head of household (up from $52,000).”

4. “The annual contribution limit for most defined contribution plans rises to $46,000, up from $45,000 in 2007.”

Talk to your financial advisor to discuss how these changes will affect your retirement planning. For a complete list of 2008 inflation adjustments, you can visit the IRS web site.