Come 2018, American employees can contribute more towards their future savings. In a recent announcement by IRS, the annual contribution limits for retirement plans is gone up from $18000 to $18500 – first jump since 2015. Employees participating in 401(k), 403(b), most 457 plans and federal government’s Thrift Savings Plans can boost their contribution by $500.

Highlights of Adjusted Limitations for 2018 Retirement Plans:

For Defined Benefit Plans, the annual contribution limit is gone up from $215000 to $220000. The amount you can save in your Defined Contribution Plans has been increased by $1000 from $54000 to $55000. And annual contribution limitation for 401(k) is increased from $18000 to $18500.

Income Phase-Out Ranges for Deductible IRAs:

ü  For single taxpayers, the phase-out range is gone up to $63000 to $73000 from $62000 to $72000.

ü  For married couples filing jointly where spouse is making the IRA contribution and covered by workplace retirement plan, the phase-out range is increased to $101000 to $121000 from $99000 to $119000.

ü  For a married individual who is separately filing return and covered by workplace retirement plan, the phase-out range remains $0 to $10000 and is not subjected to annual cost-of-living adjustments.

ü  Finally, an individual IRA contributor not covered by any retirement plan but their spouse is, the phase-out range moves to $189000 to $199000.

Phase-Out Ranges for Roth IRAs:

ü  For singles and heads of household, the phase-out range is $120,000 to $135000 in 2018 from $118000 to $133000.

ü  For married couples filing jointly, the phase-out range is $189000 to $199000 from $186000 to $196000.

Limitations of Unchanged Plans:

ü  The 401(k) catch-up contribution limit for employees aged 50 or older remains same at $6000.

ü  For SIMPLE retirement accounts, the contribution amount is unchanged at $12500 as in 2017.

Also Read: Beware of these Costly Mistakes while Withdrawing Money from your Retirement Funds!

To Conclude:

These increased contribution limits have definitely brought a greater opportunity for American workers to set aside more money for their post retirement life. 401(k) plan offers employees tax-deferred contributions and help them amass a huge future savings. In addition, it gives employers a competitive edge for attracting and retaining top talent.