What counts as 'earned income' for 2017 retirement contributions
For 2017, the main annual limit for tax-deferred retirement plans such as 401(k), 403(b), and most 457(b) plans is $18,000 if you are under age 50. Workers age 50 and older can make an additional catch-up contribution of $6,000, for a total of $24,000. These limits apply to combined employee and employer contributions. The rules differ for SEP and SIMPLE plans, where employer contributions are permitted and have separate limits. This guide explains which limits apply, who qualifies, and how to align contributions with IRS rules in 2017.
How 2017 401(k) and similar defined contribution limits work
The $18,000 limit for 401(k), 403(b), and 457(b) plans in 2017 is adjusted periodically for cost-of-living increases. If you are 50 or older, you may contribute an additional $6,000 as a catch-up contribution for a total of $24,000. These limits apply on a per-plan basis; if you hold multiple plans at work, the totals across those plans must not exceed the annual limit. The IRS requires that you be reasonably certain of your compensation for the year to avoid excess contributions. Below is a compact summary of the key limits for employees participating in workplace plans in 2017.
Key 2017 defined contribution limits at a glance
| Participant Age | Plan Type | Contribution Limit (2017) | Catch-Up Allowed | Catch-Up Amount |
|---|---|---|---|---|
| Under 50 | 401(k)/403(b)/457(b) | $18,000 | No | $0 |
| 50 and older | 401(k)/403(b)/457(b) | $18,000 | Yes | $6,000 |
SEP IRA and SIMPLE IRA rules in 2017
SEP and SIMPLE plans allow employer contributions in 2017, but the limits differ from defined contribution plans. For a SEP IRA, the cap is 25 percent of compensation or $54,000 in 2017, whichever is less. For a SIMPLE IRA, employees can contribute up to $12,500 in 2017, with an extra $3,000 catch-up for those aged 50 and older. Employers may also match contributions in a SIMPLE plan under specific rules. Because both employer and employee contributions interact with annual limits, it is important to track total activity across all plans to avoid exceeding thresholds.
2017 SEP and SIMPLE contribution limits at a glance
| Account Type | Contribution Type | 2017 Limit |
|---|---|---|
| SEP IRA | Employer-only | Lesser of 25% of compensation or $54,000 |
| SIMPLE IRA | Employee elective deferral | $12,500 |
| SIMPLE IRA | Employee age 50+ catch-up | $3,000 |
| SIMPLE IRA | Employer match or nonelective contribution | Varies by plan type; combined employee + employer subject to $12,500 cap for deferrals |
Traditional vs Roth treatment in 2017 plans
In 2017, both traditional pre-tax and Roth options are generally available within many 401(k), 403(b), and 457(b) plans. Contributions to a traditional account reduce taxable income in the year they are made, while Roth contributions are made with after-tax dollars but can grow and be withdrawn tax-free in retirement. The same annual limits apply to both types; what changes is how they are taxed now and later. Backdoor Roth strategies may be relevant for high-income earners who are ineligible to contribute directly to a Roth IRA, subject to existing rules and tax treatment of conversions.
Income eligibility and phase-outs for Roth IRA in 2017
Contributions to a Roth IRA in 2017 are phased out for single filers with modified adjusted gross income between $117,000 and $132,000, and for married couples filing jointly between $186,000 and $196,000. Above these ranges, direct Roth IRA contributions are not allowed, though high-income earners may still use backdoor strategies with careful tax planning. For those covered by a workplace plan, the deductibility of traditional IRA contributions phases out at different income levels depending on filing status and coverage status. These thresholds are important to confirm before making contributions to avoid mischaracterizing tax treatment.
Required Minimum Distributions and planning around age 70½
For 2017 and later years, the RMD age is 70½ for individuals who reached that age on or before December 31, 2019. Those turning 70½ in 2017 generally must begin taking distributions by April 1 of the year following the year they turn 70½. Subsequent distributions are required by December 31 each year. Failure to take RMDs results in a 50 percent excise tax on the amount not distributed. Because Roth IRAs do not have RMDs during the original owner's lifetime, they can play a role in legacy planning. Understanding these rules helps avoid penalties and supports long-term retirement income strategies.
Practical steps to maximize your 2017 retirement contributions
To maximize your 2017 retirement contributions, start by contributing at least enough to obtain any employer match if you are offered one, because match dollars are essentially immediate return. Decide between pre-tax and Roth based on your current and expected future tax rate, and consider mixing both within your plan if permitted. Track your total contributions across all plans to stay within limits, and if you are 50 or older, add the catch-up contribution as soon as you are able. Review your contributions at year-end to ensure you have not exceeded annual limits and correct any excess before the tax deadline to reduce avoidable tax consequences.