IRS Raises 401(k) Contribution Limits for 2018
- On Oct. 19, 2017, the IRS boosted annual contribution limits for 2018 for 401(k), 403(b), and 457 plans.
- Plan participants can contribute up to $18,500 for 2018, which is up from $18,000 for 2017.
- This is a good time to consider adding a retirement savings program to your benefits menu, if your firm doesn't yet have one.
A $500-a-year boost to the annual saving ceiling
Good news for employees who save for retirement using a workplace-sponsored 401(k) plan, a 403(b) plan, or a 457 plan (available for government and certain non-government employers). On Oct. 19, 2017, the Internal Revenue Service (IRS) raised the annual contribution limits for 2018 to $18,500, a slight increase from the 2017 limit of $18,000. The modest bump is a cost-of-living adjustment.
In addition, for 2018, the IRS raised the income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the saver's credit.
An opportune time to consider offering a retirement plan
While the size of the increase to the 401(k) plan contribution limit is relatively modest, the boost signals an opportune time to consider adding a retirement savings program to your benefits menu if you don't already have one. The savings rate among Americans today is shockingly low: More than half of U.S. workers don’t have access to a retirement savings plan to help them save for the long-term. And a recent Paychex Small Business Survey, which polled 250 principals of U.S. companies with two to 500 employees, found that more than half of small companies don’t have a retirement savings plan for either employees or owners.
Because so many working Americans aren't saving enough, the United States faces a retirement savings crisis. Employers can help combat this by offering a retirement savings plan. Doing so can help attract and retain talent, and enhance employees' retirement readiness. In addition, a 401(k) plan delivers benefits for employers, and demonstrates that a firm cares about its workers' futures.
Paychex offers a number of plan options designed to help businesses of all sizes that are considering starting a 401(k), or considering switching their current retirement plan.