Give Your Retirement Plan a Raise!

It might surprise you to hear that the Internal Revenue Service has some good news for you. IRS notice 2017-64, released recently, raises the annual contribution limits on most retirement plans, starting January 1, 2018. This is definitely good news for anyone with a 401K, 457, or 403B retirement plan. For these plans, the new annual contribution limit is $18,500, up from $18,000 in 2017, with the catchup provision for those 50 and older remaining at $6,000 per year. The IRS also raised the annual benefit limit for traditional pension (defined benefit) plans, from $215,000 in 2017 to $220,000 in 2018. Additionally, they raised the annual allowable compensation limit for deduction, benefit, and contribution purposes from $270,000 in 2017 to $275,000 in 2018.

A married couple filing jointly can reduce their taxable income by $37,000, if they make the maximum contribution to their 401K plans. Assuming a 25 percent tax bracket, that amounts to a tax savings of $9,250—pretty significant for most of us! Not only that, but they’ll obtain tax-free growth on their savings until they start making withdrawals in retirement.

Annual limits for traditional IRAs remain at $5,500 for 2018, along with the $1,000/year catchup provision for persons age 50 or older. However, the IRS adjusted upward the amount of money you can earn and still make deductible contributions to your IRA, even if you are eligible to participate in a workplace retirement plan. Single filers who make up to $63,000 can contribute (compared to $62,000 in 2017), and married filers can earn up to $101,000 (vs. $99,000 in 2017).

The IRS also made a slight increase in the amount you can contribute to a Health Savings Account (HSA): $3,450 in 2018, compared with $3,400 in 2017.

A $500 annual increase may sound like a minor improvement, but it can have a major impact on your retirement. If you’ve got as much as 20 years to retirement and you earn only a 5 percent average return, that extra annual contribution could add another $17,000 or more to your retirement fund. It all adds up!

Stay Diversified, Stay Your Course!

Empyrion Wealth Management (“Empyrion”) is an investment advisor registered with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940. Information pertaining to Empyrion’s advisory operations, services and fees is set forth in Empyrion’s current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at The views expressed by the author are the author’s alone and do not necessarily represent the views of Empyrion. The information contained in any third-party resource cited herein is not owned or controlled by Empyrion, and Empyrion does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Empyrion of the third party or any of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner or investment advisor.

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