For Mark Roberts’ Use: As you continue to plan for retirement, you are sure to hear one consistent piece of advice, over and over: Save all you can for retirement! That is common advice, and for a very good reason. We do our very best to anticipate future expenses and lifestyle needs, and create a budget to accommodate them, but no one can know everything about the future. Saving as much as possible never hurt anyone!
So, with that advice in mind, you might be happy to hear that the IRS has increased contribution limits for tax-advantaged retirement plans. Beginning in 2018, you can now contribute $18,500 per year to your 401(k) 403b, or Thrift Savings Plan (a tax-advantaged plan utilized by federal employees).
That’s just 500 dollars more than this year’s contribution limit, but consider the impact of 500 dollars per year over many years of saving. Now factor in the power of compounding interest, and you can see that stashing just 500 dollars more can add up to a sizable difference.
For now, the catch-up contribution for those aged 50 and older will remain the same. You can save an extra $6,000 in your tax-advantaged retirement account, for a total of $24,500 next year.
Remember, you’re doing more than just saving for retirement. Every dollar that you contribute to your account, up to the limit, is on a pre-tax basis. This lowers your overall taxable income for the year, and can save you money when you file your federal tax return.
If you’re ready to increase your retirement savings rate to take advantage of these changes, are thinking about re-balancing your portfolio, or have other questions about retirement planning, give us a call. We dedicate ourselves to staying up to date on changes in the retirement planning world, and pass along that knowledge and expertise to our clients.