Traditional and Roth IRA contributions remain unchanged at $6,000 or $7,000 if you are 50 or older.
You may contribute $19,500 to an employer sponsored retirement account, i.e. 401(k), 403(b), or SAR-SEP ($26,500 if you are age 50 or older). Remember, to be eligible for the catch-up allowance, you need to turn 50 this calendar year. If you are 49 now, but turn 50 in November, you are eligible for the full catch-up provision for the entire year.
A break down of changes are as follows:
The defined contribution plan limits (401(k), 403(b)) increases from $56,000 to the lesser of $57,000 or 100% of compensation (this includes employee and employer contributions).
We’re a big fan of Health Savings Accounts here at WealthPoint as they are often triple-tax advantaged. See Josh Bentz’s post on why we think you should invest your HSA for retirement and pay for healthcare expenses out of current cash flow: http://www.fullservicemovers.net/why-you-should-care-about-health-savings-accounts-hsas/
Lastly, the income phase-out range for making Roth IRA contributions has increased. Taxpayers with modified adjusted gross income (MAGI) under the lower end of the ranges shown below can make a full Roth IRA contribution. If you are in the range, you will only be able to contribute a portion of the $6,000 max. These limits do not apply to making Roth 401(k) contributions, if your employer allows it.
If you are over the AGI limits and still want to get tax-free Roth investments into your portfolio, check out Brie’s blog on Backdoor Roth Contributions: http://www.fullservicemovers.net/a-tax-free-roth-option-for-high-earners/
If you plan to save the max to your employer sponsored plan this year, be sure to review and potentially change your payroll deferral percentages. Also, if you turn the big 5-0 this year, don’t forget about the catch-up provisions.
Happy New Year and Happy Savings!