The Internal Revenue Service recently updated their 2018 retirement plan contribution limits, and the Social Security Administration announced a 2.0% increase to Social Security payouts for 2018.
First, let’s take a look at the retirement plan contribution limit changes. If your desire is to save the maximum allowable amount for retirement, you may need to make adjustments for 2018 as many retirement plan contribution limits have slightly increased.
401(k), 403(b), 457, and Thrift Savings Plan contribution limits
The contribution limit for these plans in 2018 will be $18,500 (up from $18,000 in 2017). For participants who will be age 50 or older by the end of 2018, the catch-up provision amount will remain unchanged at $6,000.
These amounts are what you, the participant, can contribute. Anything your employer puts into your account via match, profit sharing, etc. does not count against the $18,500 or $24,500. In 2018, the overall contribution limit (counting both your elective deferrals and whatever your employer puts in) will be $55,000 (up from $54,000) – or $61,000 (up from $60,000) if you are age 50 or older.
If you participate in a 403(b) plan and have a minimum of 15 years of service, you can contribute up to $3,000 more as part of your contribution. For employees over age 50, both catch-up provisions can be utilized in many cases.
457 plans have their own catch-up provisions. If you participate in a 457 plan you are allowed a catch-up provision of twice the annual elective deferral limit. The only caveat is you must be within three years of the plan’s normal retirement age.
Traditional and Roth IRA contributions limits
Nothing has changed in regards to IRAs. The annual limit remains $5,500 for 2018 with an additional $1,000 catch-up contribution allowed if you are age 50 or older.
SIMPLE IRA contribution limits
The SIMPLE IRA contribution limit is also unchanged for 2018. The limit remains $12,500 with an additional $3,000 catch-up allowance if you are age 50 or older.
The maximum allowable contribution for 2018 is 25% of pay up to $55,000. It is a little more complicated for self-employed individuals. Effectively, the limit is reduced to 20% of adjusted profit after removing self-employment tax. The calculations is based on NET self-employment income, which removes the SEP-IRA contribution itself.
Good news! If you are one of the 60+ million people currently receiving Social Security benefits, your monthly check is about to get larger. Starting in 2018 you will get a 2% boost to your monthly payout, which is the largest increase since 2012.
If you are not currently taking Social Security and have questions about your benefit and when the right time might be to start taking it, please feel free to reach out to us. We are happy to help. We have many tools that can be of use to help educate you and provide peace of mind.