Beginning in January, you may be able to save more into your retirement plan account.
It remains to be seen whether our legislators will make headway on a new tax plan, or if the resulting plan will reduce the amount we are allowed to save annually in our retirement accounts.
In the meantime, the announcement below outlines the new IRS contribution limits for 2018 under the current tax law. We are happy to speak with you if you have any questions about how this affects your personal financial situation.
IRS Benefit Plan Limits for 2018
On October 19, 2017, the Internal Revenue Service released Notice 2017-64, announcing cost-of-living adjustments (COLAs) that affect contribution limits for retirement plans in 2018. The list below, although not exhaustive, highlights key changes that retirement plan sponsors should be aware of, as well as some limitations that remain unchanged from 2017:
- The elective deferral limit is increasing from $18,000 to $18,500.
- The aggregate contribution limit for defined contribution plans is increasing from $54,000 to $55,000.
- The annual compensation limit used to calculate contributions is increasing from $270,000 to $275,000.
- The limitation on the annual benefit under a defined benefit plan is increasing from $215,000 to $220,000.
- The dollar limit used in the definition of “key employee” in a top-heavy retirement plan remains unchanged at $175,000.
- The dollar limit used in the definition of “highly compensated employee” remains unchanged at $120,000.
- The catch-up contribution limit for employees age 50 or older remains unchanged at $6,000.
The table below displays the 2017 and 2018 limits for a host of tax breaks:
|
401(k) Plan Limits for Plan Year |
2018 Limit |
2017 Limit |
|
401(k) Elective Deferral Limit1 |
$18,500 |
$18,000 |
|
Catch-Up Contribution2 |
$6,000 |
$6,000 |
|
Defined Contribution Dollar Limit |
$55,000 |
$54,000 |
|
Compensation Limit3 |
$275,000 |
$270,000 |
|
Highly Compensated Employee Income Limit |
$120,000 |
$120,000 |
|
Key Employee Officer Limit |
$175,000 |
$175,000 |
|
Non-401(k) Limits |
|
|
|
403(b) Elective Deferral Limit1 |
$18,500 |
$18,000 |
|
Defined Benefit Dollar Limit |
$220,000 |
$215,000 |
|
457 Employee Deferral Limit |
$18,500 |
$18,000 |
|
SEP and SIMPLE IRA Limits |
2018 Limit |
2017 Limit |
|
SEP Minimum Compensation |
$600 |
$600 |
|
SEP Maximum Compensation |
$275,000 |
$270,000 |
|
SIMPLE Contribution Limit |
$12,500 |
$12,500 |
|
SIMPLE Catch-Up Contribution2 |
$3,000 |
$3,000 |
|
IRA and Roth Limits |
|
|
|
IRA and Roth Contribution Limit |
$5,500 |
$5,500 |
|
Catch-Up Contribution2 |
$1,000 |
$1,000 |
| 1 |
Employee deferrals to all 401(k) and 403(b) plans must be aggregated for purposes of this limit. |
| 2 |
Contributors must be age 50 or older during the calendar year. |
| 3 |
All compensation from a single employer (including all members of a controlled group) must be aggregated for purposes of this limit. |
This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Investors should consult a tax preparer, professional tax advisor, and/or a lawyer.
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