Contributed by: Robert Ingram 
Several weeks ago, the IRS released updated figures for retirement account contribution and income limits for 2018. Like the recent Social Security cost of living adjustment, the adjustments are minor but certainly worth noting.
Employer Retirement Plans (401k, 403b, 457, and Thrift Savings Plans)
$18,500 annual contribution limit (up from $18,000 compared to 2017 – first increase in 3 years!)
$6,000 “catch-up” contribution if over the age of 50 remains the same as 2017
Total amount that can be contributed to defined contribution plan including all contribution types (employee deferrals, employer matching and profit sharing) increases to $55,000 (up from $54,000 compared to 2017) or $61,000 if over the age of 50 ($6,000 catch-up)
Consider contributing after-tax funds if available and cash flow allows for it.
In addition to the contribution limits increasing for employer-sponsored retirement plans, the IRS adjustments provide some other increases that can help savers in 2018. A couple of highlights include:
Traditional IRA deductibility income limits:
Contributions to a Traditional IRA may or may not be tax deductible depending on your tax filing status, whether you are covered by a retirement plan through your employer, and your modified adjusted gross income (MAGI). The amount of your Traditional IRA contribution that is deductible is reduced (“phased out”) as your MAGI approaches the upper limits of the phase out range. For example,
Single: Covered under a plan
Phase out begins at $63,000 up to $73,000 compared to 2017 (phase out: $62,000 to $72,000)
Married filing jointly: Spouse contributing to the IRA is covered under plan
Phase out begins at $101,000 to $121,000 compared to 2017 (phase out: $99,000 to $119,000)
Spouse contributing is not covered by a plan but other spouse is covered under plan
Phase out begins at $189,000 to $199,000 compared to 2017 (phase out: $186,000 to $196,000)
Roth IRA contribution income limits:
Whether or not you can make the maximum contribution to a Roth IRA, ($5,500 in 2018 plus a $1,000 “catch-up” for individuals age 50 and above) depends on your tax filing status and your MAGI. The contribution you are allowed to make is reduced ("phased out") as your MAGI approaches the upper limits of the phase-out range. In 2018 for example,
Single
Phase out begins at $120,000 to $135,000 compared to 2017 (phase out: $118,000 to $133,000)
Married filing jointly
Phase out begins at $189,000 to $199,000 compared to 2017 (phase out: $186,000 to $196,000)
If your income is over this limit and you cannot make a regular annual contribution, you might consider a popular planning tool known as the “back-door” Roth conversion.
As we enter 2018, these updated figures will be on the forefront when updating your financial game plan. However, as always, if you have any questions surrounding these changes, don’t hesitate to reach out to our team!
Robert Ingram is a Financial Planner at Center for Financial Planning, Inc.®
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