Can you believe that Americans have $26.6 trillion saved for retirement?
This gigantic total includes the trillions of dollars held in 401(k)s and IRAs.
Some senior savers may be able to save more in 2018 because of IRS changes to some contribution limits and income limits, according to Kiplinger’s recent article, “2018 Retirement Contribution Limits for 401(k)s and IRAs.”
401(k)s. A 401(k) allows employees to save and invest some of their paycheck pre-tax. Taxes aren’t owed until the money is withdrawn from the account. The annual contribution limit for 401(k)s in 2018 will go up to $18,500 from $18,000. This jump also applies to 403(b) and 457 plans, as well as the federal government's Thrift Savings Plan. If you’re 50 or older, remember that there’s also a catch-up contribution for 401(k)s that will stay at $6,000. That brings the maximum total contribution limit to $24,500 in 2018.
IRAs. An individual retirement account is an investing vehicle used by people to earn money for retirement savings. The limit for IRA contributions will remain at $5,500 in 2018, and the catch-up contribution for people 50 or older will remain at $1,000. If you turn 50 in 2018, you can make the full $6,500 contribution any time after January 1. There is no need to wait for your birthday.
Roth IRAs. A Roth IRA is a special retirement account to which you contribute post-tax income (you can’t deduct your contributions on your income taxes). Because the tax has been paid, future withdrawals that follow Roth IRA regulations are tax free. There’s no up-front tax deduction for Roth IRA contributions, as there is with a traditional IRA. The income limits to qualify to make Roth IRA contributions will increase a bit in 2018.
If you are filing taxes as a single or a head of household, the maximum amount can be contributed to a Roth IRA, if the modified adjusted gross income (MAGI) is less than $120,000. The contribution amount will phase out completely, once MAGI is greater than $135,000 (an increase from $118,000 to $133,000 in 2017).
For married couples filing jointly, the maximum amount can be contributed, if MAGI is less than $189,000, with the amount phasing out above $199,000 (an increase from $186,000 to $196,000 in 2017).
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Reference: Kiplinger (November 16, 2017) “2018 Retirement Contribution Limits for 401(k)s and IRAs”