401(k) Contribution Limits Are Going Up for 2018 -- but That Won't Affect the Average American
Though there are several vehicles out there to help you save for retirement, one of the most effective is none other than the 401(k). The appeal of the 401(k) is twofold. For one thing, contributions are seamless. You sign up through your employer, decide what percentage of your paycheck to set aside, and sit back as that money is automatically deducted tax-free each month. But the other factor that makes 401(k)s so appealing is their generous annual contribution limit. Whereas IRAs cap out at $5,500 a year for workers under 50, the current annual contribution limit for 401(k)s is $18,000.
And here's some good news for those who tend to max out their 401(k)s: Come 2018, you'll have the option to contribute an additional $500 for a total of $18,500.
Now that $500 boost may not seem like much, but from a tax perspective, it's a welcome change. That's because if you max out your 401(k) in 2018, and your effective tax rate is 30%, you'll shave $150 off your IRS bill -- just like that. (Note that because those 50 and over get a $6,000 catch-up, older workers can contribute up to $24,500 next year.)
Source: Fool.com
