6 Point Guide to 2018 End of Year Retirement Contributions

Well it’s that time of year—I’m not talking about holiday shopping, gorging on Christmas cookies and caramel popcorn at work or doing damage control after embarrassing yourself at the office holiday party.  I’m talking about making year-end contributions to your retirement plans.

Remember that any 2018 contributions to employer-sponsored plans like 401(k)s, 403(b)s and 457 plans must be made by Dec 31, 2018. You can make 2018 contributions to Traditional and Roth IRAs by April 15, 2019.

Here are some important highlights:

1. Annual contribution limits for most employer-sponsored plans have increased by $500

From $18,500 in 2018 to $19,000 for 2019 annual contributions limits for many employer sponsored retirement plans have creased by $500.  Note that individuals age 50 and older may make an additional $6000 “catch-up” contribution.

2. Contributions to Traditional and Roth IRAs have also increased $500

Besides increasing the limits for employer sponsored plans, contributions to Traditional & Roth IRAs have also increased from $5,500 for 2018 to $6000 for 2019.  Individuals age 50 and over can make an additional $1,000 catch-up contribution!

3. To receive a deduction for your IRA contribution, your income cannot exceed a certain amount each year (for 2018 and for 2019).

There are certain income thresholds that cannot be exceeded for you to receive a deduction for your IRA contribution, learn more about the 2018 IRS income thresholds here; and the IRS thresholds for 2019 are available here.

4. Keep an eye on the annual benefit compensation limits

The annual benefit for a participant with a defined benefit plan in 2019 cannot exceed the lesser of:

a) 100% of the participant’s average compensation for his or her highest 3 consecutive calendar years

b) $225,000 for 2019, up from $220,000 in 2018 (IRS)

5. For 2019, to qualify for a Health Savings Account (HSA ), you must have a health insurance plan with a minimum deductible

A qualifying HSA (Health Savings Account) needs to have a minimum deductible of at least $1,350 for a single person ($2,700 for a family).  In 2019 you can contribute $3,500 to your HSA is you’re single or $7,000 for a family, up slightly from 2018!

6. Remember that HSAs may be available to individuals with high deductible health plans.  

Don’t forget that Health Savings Accounts (HSAs) can be available to individuals on accounts that have high deductibles.  It has some advantages because you make pre-tax contributions, enjoy tax-deferred growth and tax-free withdrawals if used for qualified medical expenses.


Below is a quick-and-dirty chart to help you manage your retirement plan retirement contributions for 2018 and to help you plan for contributions and deferrals in 2019.

Retirement Plan Contributions Chart 2018 vs 2019

Type of retirement account

Details

2018

2019

401(k), 403(b), most 457 and Thrift Savings Plans

Annual contributions/age 50+

$18,500/24,500

$19,000/25,000

Annual defined contribution limit

$55,000

$56,000

Annual compensation limit

$275,000

$280,000

Highly compensated employee

$120,000

$125,000

Traditional and Roth IRA

Annual contribution/age 50+

$5,500/6,500

$6,000/7,000

SIMPLE IRA

Annual employee deferral

$12,500

$13,000

Age 50 and over

$15,500

$16,000

SEP IRA

Annual contribution

$55,000

$56,000

SEP Minimum compensation

$600

$600

SEP Maximum compensation

$275,000

$280,000

Defined Benefit Plans

Maximum annual benefit at retirement

$220,000

$225,000

Health Savings Accounts (HSA )

Maximum contribution/over age 55

Single $3,450/4,450

Family $6,900/7,900

Single

$3,500/4,500

Family

$7,000/8,000

Minimum deductible

Single $1,350

Family $2,700

Single $1,350

Family $2,700

Maximum out-of-pocket expense

Single $6,650

Family $13,300

Single $6,750

Family $13,500

Saving is key to a successful retirement.  

One of the best ways to save is to take advantage of employer-sponsored plans and health savings accounts or saving on your own in an IRA.  Make sure you are maxing out your annual contributions and that you are working with an advisor who can advise you on how to invest your tax deferred assets for growth.

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