Infographics: Revised Retirement Contribution Limits for 2018
The IRS has announced new 401k contributions limits after its regular cost-of-living adjustments. Apart from the regular IRA, most of the retirement plans have higher contribution limits now.
We have put together an Infographic highlighting the changed contribution limits for popular retirement plans.
Some of the key changes in Retirement contribution limits for 2018 are:
- SEP: For SEP plans, the maximum contribution limits for 2018 have risen to $55,000, $1,000 higher than 2017. The maximum salary compensation for eligible employees is raised to $275,000 in 2018 from $270,000 in 2017.
- 401(k), 403(b), profit-sharing plans, etc.: You can make elective deferral contributions of up to $18,500 in 2018, up from $18,000 in 2017. The defined contribution limit for these plans is increased to $55,000 in 2018 from $54,000 in 2017.
- Solo 401k plans: If you have a Solo 401k plan, you can contribute up to $61,000 in 2018, inclusive of the catch-up contributions of $6,000.
Impact of contributing an additional $500 towards retirement
Let’s decide the terms first:
Annual rate of return: 5% compounded annually
Base amount: $0
Contribution period: 30 years
Case I: In the first case, Samantha contributed $18,000 annually to her 401(k) plan continuously for 30 years. She ended with net retirement savings of approximately $1.23 million.
Case II: In the second case, Samantha contributed $18,500 to her 401(k) plan for 30 years. The additional $500 contributions made annually helped her accumulate approximately $1.26 million, $33,000 more than the first case.
Impact of contributing an additional $1,000 towards retirement in a Solo 401k
Keeping the same terms:
Annual rate of return: 5% compounded annually
Base amount: $0
Contribution period: 30 years
Case I: On contributing $54,000 annually to her Solo 401k plan, assuming maximum contributions, Samantha accumulated nearly $3.68 million in her account.
Case II: In the second case, after contributing $55,000 annually for 30 years, Samantha had net retirement savings of $3.75 million in her account, nearly $70,000 more than the first case.
In short, every single dollar contributed towards retirement savings counts.
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