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By: Brian Bristow

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2017-12-20

Retirement Plan Contribution Limits to Rise in 2018

Saving and Budgeting | Investing in the Future

Thanks to inflation, the federal government has increased the annual contribution limits and phase-out ranges on some of the most popular qualified retirement plans. This is a great shift, allowing you to save more in your workplace retirement account in 2018.

 

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Contribution limits

Retirement plan contribution limits for 401(k)s are rising by $500. This is the first increase seen in three years.Tweet: Retirement plan contribution limits for 401(k)s are rising by $500. This is the first increase seen in three years. https://ctt.ec/70Cc7+ In 2018, you can direct up to $18,500 into one of these accounts; $24,500, if you are age 50 or older.

 

This $500 increase also applies for three other types of retirement plans—the 403(b) plans in place at schools and non-profit organizations, the Thrift Savings Plan for federal employees, and most 457 plans sponsored by state and local governments.

 

If your company has a defined contribution plan, the annual limitation on the total contribution from employer and employee will increase by $1,000 in 2018, bringing the limit to $55,000.

 


Defined contribution plan: a retirement plan that both the employer and the employee can contribute to.


 

Health Savings Account contribution plan limits are also increasing in 2018. The yearly contribution limit for those enrolled in individual plans will rise $50, to $3,450; the yearly limit for those enrolled in qualifying family plans will rise $150, to $6,900. The respective catch-up contribution limits will rise to $4,450 and $7,900.

 


Health Savings Account: a tax-deferred savings account that helps people who are enrolled in a high-deductible health plan (HDMP) pay for medical expenses. You must be enrolled in an HDMP to have a health savings account.

 

Catch up contribution: people at age 55 or older can make catch-up contributions. With this contribution the person can elect to defer a portion of their salary, before taxes, to their savings plan.


 

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Phase-out range limits

Phase-out ranges on IRA contributions are on the rise as well. The annual IRA contribution limits won’t change in 2018 ($5,500 for those under 50; $6,500 for those 50 and older), but the adjusted gross income limitations that reduce your eligibility to make IRA contributions are adjusted for inflation.

 


Phase out range: the gradual reduction of a taxpayer’s eligibility to contribute to a tax-advantaged retirement account as the taxpayer approaches an income limit (Investopedia)


 

If you are single and participate in an employer-sponsored retirement plan such as a 401(k), your new phase-out range will be $1,000 higher; ranging from $63,000 to $73,000. Joint filers who contribute to workplace plans have a phase-out range of $101,000 to $121,000, a $2,000 increase. If you want to contribute to an IRA and do not contribute to a workplace retirement plan, yet your spouse does, your phase-out range is $3,000 higher, ranging from $189,000 to $199,000.

 

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Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America. FR-2163880.1-0618-0720 

About Brian Bristow

Brian Bristow is the program manager and financial advisor with MEMBERS Financial Services located at VSECU

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