If you’re participating in a qualified retirement account, you know that it carries more than one benefit. Yes, the account helps you save for retirement and even allows your employer to make matching contributions. But it also carries distinct tax advantages. Since contributions are made on a pre-tax basis, the end result is that your taxable income is reduced by the amount of your contributions (up to a certain limit) each year.
We have some good news for you: The IRS has approved an increase to that contribution limit, beginning in 2018. That means you can save more for retirement, and you can also save a little bit more on your taxes each year, too.
The increase is “only” 500 dollars, bringing your total contribution limit to $18,500 for 2018 and each year beyond (assuming the limit isn’t raised again at some point). It doesn’t sound like much, but over a decade or so, with compounding interest added into the equation, the extra contribution will make a difference in your retirement account.
Of course, if you’re age 50 or older, you can also make “catch up” contributions each year. So far that limit will remain unchanged, at an additional $6,000 per year. That translates into the same tax break that other pre-tax contributions grant you. So, if you’re age 50 or older, your total pre-tax contribution in 2018 can be $24,500.
If you’re also interested in funding an IRA, your contribution limit for 2018 will be $5,500, with an additional $1,000 contribution available to those age 50 and over.
For more information on retirement plan contribution limits, or any other retirement planning topic, give us a call. We can schedule an appointment to discuss your concerns, while helping you identify possible tax savings and other opportunities.