Limits Increased-How Much Will You Save for Retirement In 2018?

Limits Increased-How Much Will You Save for Retirement In 2018?

October 22, 2017

When you ask most people what lifestyle change they would like to do more of when they reach retirement, most will say that they want to travel or see the world. Every day in retirement, especially the first couple of years will be like a never-ending vacation. Many people will be surprised when they see how much their new lifestyle called retirement will cost them.

If you do a Google search and ask how much should you save for retirement, you will find hundreds of articles and opinions on this topic.  For simplicity sake, let's just say, we as Americans have not saved enough for retirement to live the lifestyle we imagined. On October 19, 2017, the Internal Revenue Service announced the cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for the tax year 2018.  Since many working Americans have the opportunity to contribute to a retirement plan on their job, I will highlight the changes specific to employees who participate in their company 401(k), 403(b), 457 plans, and the federal government’s Thrift Savings Plan. Contribution limits for these plans will increase from $18,000 to $18,500 for 2018.

Here are specific limitation changes that will affect most working Americans who participate in retirement plans:

"The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the saver’s credit all increased for 2018.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2018:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is $63,000 to $73,000, up from $62,000 to $72,000.
  • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $101,000 to $121,000, up from $99,000 to $119,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $189,000 and $199,000, up from $186,000 and $196,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income phase-out range for taxpayers making contributions to a Roth IRA is $120,000 to $135,000 for singles and heads of household, up from $118,000 to $133,000. For married couples filing jointly, the income phase-out range is $189,000 to $199,000, up from $186,000 to $196,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $63,000 for married couples filing jointly, up from $62,000; $47,250 for heads of household, up from $46,500; and $31,500 for singles and married individuals filing separately, up from $31,000.

Highlights of Limitations that Remain Unchanged from 2017

  • The limit on annual contributions to an IRA remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $6,000."

If you would like to read the full announcement, follow this link: IRS Announces 2018 Contribution Limits

About Terrell Dinkins, MBA, ChFC®

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Terrell Dinkins, MBA, ChFC® is an investment adviser representative of and offers investment advisory services through OBN Wealth Advisors, LLC, a registered investment adviser offering advisory services in the State of Georgia and other jurisdictions where registered or exempted. Main Office: 950 Eagles Landing Pkwy, Suite 216, Stockbridge, GA 30281. Tel: 404-723-9780. Website: OBN Wealth Advisors