2018 Retirement Account Limits

How Much Can You Contribute this Year?

By PAUL TAGHIBAGI | Special to the Palisadian-Post

Here is a rundown of yearly contribution limits for the popular retirement savings vehicles.

IRAs: The 2018 limits are the same as in 2017: $5,500 for IRA owners who will be 49 and younger this year and $6,500 for IRA owners who will be 50 or older. These limits apply to both Roth and traditional IRAs.

What if you own multiple IRAs? This $5,500/$6,500 limit applies to your total IRA contributions for a calendar year. So, for example, should you happen to have five IRAs, you could make an equal contribution of $1,100 (or $1,300) to each of them in 2017 or unequal contributions to them not exceeding the applicable limit.

Keep in mind that you can fund your 2017 IRA until April 17, 2018 (the 2017 tax deadline). It is best to fund your IRA right as the year starts but if you have procrastinated so far you still have time.

High earners may find their ability to make a full Roth IRA contribution restricted. This applies to a single filer whose adjusted gross income falls within the $120,000-$135,000 range and to married couples whose AGIs land between $189,000-$199,000. If your AGI exceeds the high ends of those ranges, you may not be eligible for a 2018 Roth IRA contribution. (For tax year 2017, the respective phase-out ranges are $118,000-$133,000 and $186,000-$196,000). The eligibility requirement does not apply to traditional IRA contributions.

401(k)s, 403(b)s and 457s: These employee retirement plans have 2018 contribution limits of $18,500, however if you will be 50 or older this year, the 2018 contribution limit is $24,500. That means you are eligible to make a “catch-up” contribution of $6,000 above the usual limit.

Both 403(b) and 457(b) plans also offer special catch-up opportunities. If you participate in a 403(b) plan, you can opt to take advantage of its 15-year rule: If you have 15 or more years of tenure and your average yearly contribution to the plan has been $5,000 or less, you can direct an extra $3,000 per year into the plan.

If you participate in a 457(b) plan sponsored by a state or local government agency, you can contribute up to double the annual limit each year if you are within three years of normal retirement age. In 2017, that meant that you could put up to $36,000 into your 457(b) plan; in 2018, the limit is $37,000.

SIMPLE IRAs and SEP-IRAs: In 2018, the contribution limit for a SIMPLE IRA is $12,500; those who will be 50 or older this year may contribute up to $15,500. Business owners need to match these annual employee contributions to at least some degree. Self-employed individuals can contribute employee and employer to a SIMPLE IRA.

Business owners and the self-employed can also contribute to SEP-IRAs. All contributions to these accounts must come from the business, and all contributions are tax deductible.

The annual contribution limit on a SEP-IRA is very high—in 2018, it is $55,000 or 25 percent of the business owner’s net self-employment income, whichever is lower.

Paul Taghibagi may be reached at 310-712-2323 or teampt@seia.com.