2018 Brings Good News for Those Planning for Retirement


2018 Brings Good News for Those Planning for Retirement

Posted by RDW Financial Group
2 years ago | November 13, 2017

In the retirement planning world, a large part of our jobs is to help you sort through various forms of retirement income and decide how to most effectively fund the next stage of your life. While different solutions work well for different people, one rule always remains the same: You should save as much as you can for your retirement, each year of your working life.

So, for those of you currently maxing out your retirement plan contributions each year, we have some great news. The IRS has decided to raise contribution limits for 2018 and each year beyond, allowing you to save a bit more for your retirement throughout your career.

What type of accounts does this change apply to? We’re talking about qualified retirement accounts, which include 401(k), 403b, and Thrift Savings Accounts (a retirement plan accessed by federal employees). Contribution limits for Individual Retirement Accounts (IRAs) are a wholly different topic, although some people do choose to fund both types of accounts.

How much is the increase? The new contribution limit is $18,500, an increase of 500 dollars per year. That might not sound like much, but multiply 500 by the number of years you plan to continue working, and factor in compounding interest on that money. As you can see, the increase could prove to be quite helpful!

What about catch-up contributions? That limit remains the same for now, at $6,000 per year for those age 50 and over. So you can now stash a total of $24,500 in your retirement account each year, once you turn 50.

Is there any other benefit to this new limit? Yes! In fact, saving more for retirement is only half of the good news. The other half is that, since retirement plan contributions are made on a pre-tax basis, your contributions lower your overall taxable income for the year. So, not only will you save more for retirement, but you will also save a bit on your federal income taxes.

If I make the maximum allowable contribution each year, does that mean I’ll retire comfortably? That’s a complicated question, and will depend upon individual factors such as your lifestyle requirements, your outstanding debt, your medical expenses in retirement, and of course, how well investments perform within that account. Saving the maximum amount each year certainly helps you build toward a secure future, but nothing is ever guaranteed.

So, give us a call to discuss all of your retirement planning options. We can help you assess your current financial outlook and make recommendations that can help bring you peace of mind as you move toward retirement and beyond.

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