It is 2018. Are you still maxing your allowable retirement plan contributions?
The Internal Revenue Service announced the new contribution limits on retirement plans in early February. While the Tax Cuts and Jobs Act did not result in major changes to baseline contribution limits itself, limits for Self-Directed 401(k) plan contributions were increased by $500 for 2018, compared to the prior year.
Self-Directed 401(k) Contribution Limits
For 2018, employee beneficiaries of Self-Directed 401(k) plans can contribute up to $18,500 for the year on a pre-tax, salary deferral basis, or as after-tax Roth IRA contributions if their plans allow for Roth IRA contributions.
For those 50+ allowable ‘catch-up’ contribution limits for Self-Directed 401(k)s remained unchanged at $6,000.
The same salary deferral limits apply to Section 403(b) plans, most Section 457 plans and to the federal Thrift Savings Plan as well, though our Self-Directed 401(k) investors and small business owner readers will be most interested in the 401(k) provisions.
Self-Directed IRA Contribution Limits
Unchanged for 2018 are the contribution limits to Self-Directed IRAs remain at $5,500 for single taxpayers, and $5,500 each for married couples filing joint returns — provided they meet the income requirements listed below.
Taxpayers ages 50 and older may contribute an additional $1,000 in “catch-up” contributions, each for a total of $6,500 for single taxpayers, and $6,500 each for married couples. Remember, the above amounts reflect the total combined contribution limits for all Traditional IRA, Roth IRA, and Self-Directed IRAs. As such, if you have more than one of the aforementioned accounts, your total contribution to all may not exceed $5,500 or, depending on your age, $6,500.
Self-Directed IRA Income Thresholds
The Self-Directed IRA income threshold for those covered by workplace retirement plans has increased. The allowable income tax deduction for single taxpayers and heads of household now phases out when adjusted gross income reaches $63,000 and phases out completely at $73,000. This represents a slight increase compared to 2017. For married couples, the allowable deduction phases out with AGIs from $101,000 to $121,000 per year for 2018 – also a modest increase compared to the prior year.
Furthermore, when a Self-Directed IRA contributor is not covered by a workplace retirement plan but is married to someone who is a plan beneficiary at his or her workplace, the deduction phases out gradually when the couple’s AGI reaches $189,000 and phases out completely at a household AGI of $199,000 per year.
Roth IRA Contribution Income Thresholds
Roth IRA allowable income limits have increased for 2018. Single taxpayers can make a full contribution of $5,500 (plus another $1,000 age 50+) to a Roth IRA if their AGI for the year is $120,000 or below. From that point, the allowable Roth IRA contribution phases out gradually until the taxpayers’ AGI reaches $199,000 for the year.
For married couples, just as with Traditional IRAs, the allowable Roth IRA contribution for 2018 begins to phase out when the couple’s joint AGI reaches $189,000 and phases out completely when AGI hits $199,000.
Again, these more generous limits in 2018 may allow you to increase your contributions to these attractive retirement plans and take advantage of more favorable taxation as well as the asset protection qualities of retirement plans.
To increase your contributions, or to find out more about Self-Directed IRA investing strategies in general, call us today at 866-7500-IRA (472). Or visit our website at www.AmericanIRA.com.