Lost amid the uproar following recent news reports that GOP lawmakers are considering capping pretax 401(k) contributions at $2,400 annually — compared with $18,000 currently — was some good news from the IRS, of all places. The tax agency has announced new, higher contribution limits in 2018 for various retirement savings accounts.
Individuals who participate in a 401(k) or other similar type of retirement plan need to know these new limits as they begin to think about their cash flow and financial planning for 2018. The annual limit on contributions for 2018 is $18,500, up from the current limit of $18,000. And if you’re 50 or older at any time during the year (even if your 50th birthday falls on Dec. 31), you can also make additional catch-up contributions into these tax-advantaged savings plans and accounts of an additional $6,000, for a total annual contribution of $24,500. The self-employed can also set up and fund their own 401(k) profit-sharing plan, which allows for the same type of contributions mentioned above. Using this type of plan, which is easily set up at any major brokerage firm, you can also make an additional contribution that’s a percentage of net profit (this is the profit-sharing part of the plan).
You can read more about the 2018 changes at the below link.