Every year, the IRS updates contribution limits for the various types of retirement plans. If you want to ensure that you are getting the most out of your Self-Directed 401(k), you will want to know these figures. This issue is particularly pressing for plan holders over 50, who are allowed to contribute more than younger individuals in the early stages of their working lives. Wherever you are in your career, it is helpful to know the most current information to effectively plan for retirement. Read on to learn more about the updates for the year 2018.
Elective Employee Contributions
The contribution permitted from the employee to the plan is now $18,500 for those under age 50. This is a $500 increase from the 2017 limits.
If you are over the age of 50, you have the option to make “catch up” contributions to maximize your retirement savings. There was no increase in catch up contribution limits for 2018. The limit remains the same as it was in 2017: $6,000.
Total Annual Maximum Contributions
Total Annual Maximum Contributions take into account all possible sources of plan income. The new limit for 2018 is $55,000. This is an increase of $1,000 from the 2017 maximum. For those over 50 who choose to make a catch-up contribution of $6,000, the limit is $61,000. You can learn details about why taking advantage of this maximum is a good idea from our educational article on the Solo 401(k)’s unique features.
Health Savings Accounts (HSAs)
Many investors who want to maximize their savings take advantage of HSAs alongside their 401(k). If you are among them, then you may want to know about the new HSA maximum contributions. The new limit for individual HSAs is $3450, which is $50 more than was permitted in 2017. Family HSA plans also saw in increase of $150 from last year, up to $6900 for 2018.
What About IRAs?
At the time of this writing, contribution limits for IRAs have remained unchanged for several years. The most recent increase was in 2013. If you’re using an IRA, the contribution limits remain the same as they did last year: $5,500 for individuals under 50, and $6,500 for individuals over 50. For many people planning their retirement, this is yet another compelling reason to look into the Self-Directed 401(k).
That’s all for our quick update on the contribution limits for 2018. If you’re unsure about what to contribute this year or what type of account is best for you, we encourage you to contact a professional for personalized guidance.