From 401(k) plans to individual retirement accounts to Social Security, the federal government has been busy in recent weeks adjusting numbers for 2018. Whether you're an employee or business owner, senior management or nonexempt staff, these changes may affect how you approach retirement in the coming months and years.
Social Security: New ceilings
First, let's start with what is not changing. The 7.65 percent Social Security deduction remains the same. And as before, it's doubled to 15.30 percent for the self-employed.
However, the maximum earnings subject to Social Security rises from $127,200 to $128,400, a $1,200 difference. (Note that earlier this year, the SSA had reported that the new amount would be $128,700, but due to recalculations, it changed the amount to $128,400 at the end of November.) The Society for Human Resource Management estimates that this change means 12 million more workers will be paying more Social Security tax than before. The 1.45 percent Medicare portion, which has no ceiling, remains unchanged.
Those who are working while collecting Social Security catch a small break: The SSA is raising slightly the amount people can earn before losing a portion of Social Security benefits. The new amounts are $10 or $40 a month, depending on the recipient's status.
Another significant change is to the maximum Social Security benefit for those retiring at full retirement age, which changes from $2,687/month to $2,788/month, a $101 increase. More details are available on the Social Security site.
Retirement plan limits rise
Workers who can afford to do so can put away a little more for retirement: The limit for 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan is increased from $18,000 to $18,500.
It's a little more complicated for those contributing to IRAs:
Roth IRA contributors also get a bump up: The income phase-out range is $120,000 to $135,000 for singles and heads of household, up from $118,000 to $133,000. For married couples filing jointly, the income phase-out range is $189,000 to $199,000, up from $186,000 to $196,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Some IRA numbers are not changing, however:
These are just summaries of complex rules. Be sure to give us a call so we can explain how these changes may affect your situation.
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