2018 IRS Contribution Limits for 401k, 403(b) and IRA Retirement Accounts.

The IRS recently announced the new cost of living adjustments to the annual limits on retirement contributions for 2018.  These are the limits that identify the amount of money you can contribute to certain tax benefited retirement plans.  This can and should affect how you formulate your estate and retirement planning in Tennessee.  A really good strategy for long term estate planning is to make sure a significant portion of your assets are in these tax advantaged accounts.

The new 2018 annual limits for contributions to a 401(k), 403(b), most 457 plans and the federal government Thrift Savings Plan remains the same as the prior year at $18,500.00.  This is the first change in several years and it welcome news for retirement savers.  The annual catchup contribution allowance for these plans, available to those over 50, stands at $6,000.00 for 2018.   As a result, someone over the age of 50 can contribute $24,500.00 annually to their 401k starting in 2018.

The limit for contributions to an IRA (Roth or normal IRA) is unchanged for 2018.  It remains at $5,500.00.  For those who take advantage of the Roth IRA, the AGI (Adjusted Gross Income) phase-out level for the ability to contribute was adjusted up for 2018.  The phase-out now begins at $189,000.00 for married couples filing jointly and $120,000.00 for singles and heads of household.  Once you hit these levels, the ability to contribute begins to phase out until it is eliminated.

You need to work to update your beneficiary designations on your retirement and other accounts while you review if any of the above changes can affect you.  In Tennessee, if you have a proper beneficiary designation, these assets can pass outside of probate.  If you do not have any designation or if you name your estate as the beneficiary, then this money will pass through your estate in the probate process.  This will certainly extend the time it will take to get to the proper beneficiaries.  Many times, the beneficiary designations do not match the terms in the Will - and this is usually unintended.  Life circumstances also change and this is an important thing to remember so your beneficiary designations match your intentions that are expressed in your Will.