Many policy changes over the course of the past few months will have a significant effect on your 2018 financial outlook, from 401(k)s to Social Security. Here are some of the changes you need to be prepared for as you plan and save for your retirement.
A New Ceiling for Social Security
While the 7.65% Social Security deduction for employed and 15.30% for self-employed is still the same, the earnings maximum is rising from $127,200 to $128,400. This seemingly minor change will result in a whopping 12 million workers paying more Social Security tax than before. If you are working while collecting benefits, there will be a higher ceiling for ineligibility (between $10-$40/month, depending). The retired benefit for Social Security recipients is also increasing $101.
Higher Limits for Retirement Plans
If you are looking to save more for retirement, you’re in luck! The new limit for 401(k), 403(b), 457 plans and Thrift Savings Plans (TSPs) is rising from $18,000 to $18,500. If contributing in the form of an IRA, things are a little bit different:
- Single taxpayers with a workplace retirement plan will have a range of $63,000-$73,000 instead of the previous $62,000 to $72,000
- Married couples who file jointly, where the spouse with the workplace retirement plan is also the spouse making IRA contributions, will have a similar increase ($101,000-$121,000 instead of the previous $99,000-$119,000)
- Any married individuals who contribute to an IRA and are not covered by workplace retirement (but have a partner who is) will not lose their deduction until their income reaches the $189,000-$199,000 bracket instead of $186,000-$196,000.
- There is no cost of living adjustment for married individuals filing separately who are covered by workplace retirement plans.
There is also an adjustment for Roth IRA contributors, as the income cap has gone from $118,000 to $120,000 for singles and $133,000 to $135,000 for married couples. What isn’t changing for Roth IRA retirement savers? The limit for annual contributions is still $5,500 and the catch-up contribution limit for those over age 50 is $1,000.
Work with Your Advisor at Miles Tax Advisory
Not sure how some of the above changes could affect your retirement savings? Schedule a meeting today with your tax advisor at Miles Tax Advisory.