The IRA contribution limits for 2018 was recently updated. There are a couple of notable changes from the implemented guidelines of the IRA contribution limits of 2017. For the year 2018, there are no changes to the IRA contribution limit except for the income limits on Roth IRA contributions. There is also an increase set to take place for 2018 in the traditional IRA tax deduction. Read more about the updates below.
What Are The IRA Contribution Limits for 2018?
Every year, the IRS announces updated contribution limits and income thresholds for Individual Retirement Accounts, or IRA’s. The IRA contribution limit is not changing in 2018, but the income limits for Roth IRA contributions and the traditional IRA tax deduction are increasing. Here’s a guide to help determine your 2018 IRA contribution and deduction limitations.
The last increase in the contribution limit was in 2013. An added $500 raised the IRA contribution limits from $5,000 to $5,500. If you are 50 years old or older, your catch-up contribution remains at $1,000, which means your IRA contributions can be up to $6,500 for the next year.
How the Guidelines Apply
One thing to note is that the limit applies not per account, but per person. You can have both Traditional and Roth IRA’s, but the total contributions for 2018 should not exceed the set limit. The 2018 timeline for contributions runs from January 1, 2018 until April 15, 2019. IRA contributions for 2017 also end until April 17, 2018 as that is the due date for the tax returns for 2017.
In order to be eligible for the IRA contribution, you must be earning an income in the form of wages and salaries. This doesn’t include passive sources of income such as investments.
What Are Its Implications
IRA contribution limits dictate your earning potential. Contributions are tax-deductible so you save more now and earn more later. Be sure you’re contributing your max potential to see the maximum benefits upon retirement. Your retirement planning should be calculated based on your needs now vs. your desired needs later. Aside from that, one of the factors to consider is the contribution limit.
For instance, tax-deferred accounts disable payments of tax from the dividends generated from investments. Capital gains follow the same tax deductions guideline. Receiving the full profit amount will enable more opportunities to use the money for other investments.
What are your thoughts on the IRA contribution limits for 2018? Do share your suggestions in the comments section below.