We have some good news for those of you who are utilizing a tax-advantaged retirement account to prepare for your future (hopefully, that’s everyone reading this blog). The IRS has increased the annual contribution limit, so you’ll be able to save a bit more for retirement in 2018 and beyond.
The increase is 500 dollars, bringing your maximum annual contribution to $18,500, which might not sound like a lot at first. But first, remember that 500 dollars per year adds up fast (and there will likely be further increases in the future). Second, keep in mind that over a decade or two, compounding interest helps your money grow. So every little bit counts!
Also, if you’re age 50 or over, you can divert an extra 6,000 per year to your retirement account while enjoying the same tax advantages. If you fall into that group, you can save $24,500 next year.
This contribution limit increase applies to 401(k) plans, 403b plans, and Thrift Savings Accounts (for federal employees). Remember, this is only your contribution limit. If your employer offers some form of matching funds, you can still receive those without going over the limit.
We have one more piece of good news: Since your contributions to these retirement accounts are made on a pre-tax basis, the increased contribution limit translates into a 500-dollar taxable income reduction. That might save you a few dollars when you file your taxes in 2019.
In other news, the annual limit for IRAs and Roth IRAs is $5,500, with an additional $1,000 catch-up contribution for those aged 50 and older. Some people choose to fund both a traditional retirement account and an IRA.
If you want to increase your contributions, or have other questions about retirement planning, just give us a call. We will help you understand your options, and the contribution limits for each type of retirement account.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Investing involves risk including loss of principal. No strategy assures success or protects against loss.