Mark your 2018 calendar to increase your retirement plan contributions starting in January.
In October, the Internal Revenue Service (IRS) published the cost-of-living adjustments affecting dollar limits for retirement plans for the 2018 tax year.
Due to a modest increase in the cost of living, as measured by the Bureau of Labor Statistics, the following items remain at 2017 levels:
- IRA Contribution Limits
- SIMPLE IRA Deferrals
- Catch-Up Amounts
RETIREMENT PLANS: INCREASE YOUR CONTRIBUTION IN JANUARY
Annual maximum contributions for 401(k), Roth 401(k), 403(b), Roth 403(b), and 457 Plans increased from $18,000 to $18,500.
SOCIAL SECURITY: MORE MONEY COMING YOUR WAY
On October 13, the Social Security Administration announced a two percent cost of living adjustment to benefits – the largest increase since 2012. This adjustment will increase payments to beneficiaries by $27, on average.
The Taxable Wage Base increased by a little over one percent. This results in a $93 Social Security tax increase year-over-year for those with earned income at or above the limit. The new maximum earned income upon which social security taxes are owed is $17,040 – up from $16,920 in 2017.
One other notable increase is the amount that working retirees may earn before experiencing a decrease in their Social Security income payments. Those younger than full retirement age can earn up to $17,040, which is $120 more than the 2017 limit. One dollar of Social Security benefits is deducted for every two dollars earned above the $17,040 limit.
The linked chart highlights the year-over-year changes for easy identification: 2018 Retirement Plan Limits.
For further reading, check out this article by U.S. News: http://bit.ly/2hNi7Ik