The Internal Revenue Service has announced
cost of living adjustments affecting dollar limitations for retirement plans
and other retirement-related items for tax year 2018. The maximum
amount a person can contribute to his or her retirement account is set each
year by the IRS after taking inflation into account.
For the year 2018, people can
contribute up to $18,500 as an elective deferral to their employer's 401(k)
plan. Additionally, if you are age 50 or older, you can contribute an
additional catch-up contribution of $6,000.
The 401(k) limit applies to all
401(k) accounts you might have for the current year. If you work at two or more
jobs or switch jobs in the middle of the year, then you may need to track your
401(k) contributions yourself to ensure that you don't contribute over the
For people who plan to contribute
the maximum allowed, it may be easiest to break the annual limit into equal
dollar amounts per pay period. That way, you'll be saving the same amount each
pay period and will be dollar-cost-averaging into your retirement investments.
Elective deferrals are treated
separately from the employer's matching contributions. Elective salary
deferrals can be placed into a tax-deferred traditional 401(k) or into a
post-tax Roth 401(k) account, or a combination of traditional and Roth as long
as the total of all salary deferrals are equal to or less than the annual
maximum. Matching contributions from the employer are limited to 25% of your
salary (or 20% of your net self-employment income if you are self-employed).
Matching funds are always contributed to the tax-deferred portion of your
401(k) plan. The total of your elective salary deferral plus employer matching
contributions is limited to $55,000 for the year 2018.
here to view the IRS contribution limits announcement.