There is no doubt – the Internal Revenue Service (IRS) is the governing body when it comes to your retirement account. For 2018, the IRS did not make any major changes. However, any change, regardless of size, it worth knowing. This is especially true when they affect your contribution limits.
A Quick Note On Retirement Accounts
Before we get into the contribution limits for 2018, we want to make one thing clear. The limits imposed by the IRS on 401(k) plans apply to all types of these accounts. This includes your individual 401(k), self-directed 401(k), self-administered 401(k)s and more.
2018 Contribution Limits for 401(k) Accounts
The contribution limits below apply to both employees and employers. Let us take a look.
- Employee Elective Deferrals: Employee elective deferrals are the contributions you make with your pre-tax dollars. Also known as employee contributions, these funds are pulled directly from your paycheck and deposited in your 401(k) account per your instructions. For individuals under the age of 50, the contribution limit for this has increased. In 2018, you can increase your contribution from $18,000 to $18,500. That is a $500 increase for your future!
- Catch-Up Contributions: A catch-up contribution is for individuals who are looking to save a bit more for their golden years. For those over 50, at which point the IRS permits you to make catch-up contributions, the limit has not changed. (For those who do not know, a catch-up contribution allows you to increase your total limit by $6,000 each year.
- Total Annual Maximum Contributions: Some individuals have multiple types of 401(k) accounts. If this is you, then you should be aware of the total annual maximum contribution limit. (This limit is the total you can contribute between all of your accounts.) This limit did increase for 2018 from $54,000 to $55,000. For those over the age of 50, however, your catch-up contribution adds that additional $6,000 to this and gives you a new maximum of $61,000.
Other Types of Retirement Accounts
The IRS also sets limit for other types of accounts as well. Your health savings account, or HSA, is one such example. For individual HSAs, there was a $50 increase, which gives you a new total contribution limit of $3,450. Family HSA plans also increased. With a new limit of $6,900, these accounts have a $150 increase.
For individual retirement accounts (IRAs), however, the IRS has continued with the current contribution limits. These limits, established in 2013, remain at $5,500 for individuals under the age of 50. For individuals over the age of 50, the limit remains at $6,500 as well.
Stay Informed On Contribution Limits For 401(k) Accounts
One of the best ways to stay informed regarding your retirement account is to hire a reputable custodian. At Royal Legal Solutions, we do the homework for you when it comes to IRS regulations. Our professionals have years of experience studying and applying tax laws to help our clients avoid penalties and unnecessary fees. If you would like to learn more about retirement accounts, tax laws, or contribution limits, contact Royal Legal Solutions today!