Estes Wealth Strategies
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Your Life of Possibilities

 

What's New for Retirement Savings, Gifting, and Social Security in 2018?

Every fall, the government "powers that be" huddle and determine, based on the inflation rate, whether to increase the amounts Americans can contribute to workplace retirement plans, sock away in individual retirement accounts (IRAs), gift without tax implications, and receive in their monthly social security checks.
 
In recent years, these amounts have mostly remained flat. But 2018 will see many of these limits increase. Here's a quick summary to help guide your planning for the upcoming year.

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2018 Workplace Retirement Savings Limit to Increase by $500

The IRS is increasing the amount you can contribute to your qualified workplace retirement plan—i.e., your 401(k), but also including 403(b), 457, and thrift savings plans—by $500 to an annual contribution limit of $18,500. Note: This limit does not apply to additional non-elective contributions made by employers such as matching contributions.

The additional catch-up limit for workers age 50 or older remains the same at $6,000 for 2018.

2018 Gift Tax Exclusion Limit to Increase by $1,000

The annual gift tax exclusion is the amount of money or property you can give away to others throughout the year without having to file a gift tax return or pay gift tax to the IRS. For 2018, the IRS is increasing the exclusion by $1,000 to $15,000, which can give a modest boost to those concerned with estate planning strategies.

As a side note, not all gifts count toward this limit. For example, spouses are not limited in the gifts they can give to one another. Paying school tuition or medical bills for someone else also do not trigger the gift tax—so long as payments are made directly to the service provider, not the beneficiary.

2018 Social Security Checks to Increase by 2%

In 2018, social security recipients will see a 2% cost of living adjustment (COLA), the biggest increase since 2012 given the fairly flat inflationary environment of recent years. For the average retired worker, this translates to an estimated $27 per month stipend increase. However, some workers who have their Medicare Part B premium deducted automatically from social security may see their increase absorbed by corresponding Medicare increases.

Also of note, high earning workers may see a little bit more deducted from their paychecks for social security in 2018. The maximum taxable earnings cap—i.e., the point where social security tax is no longer deducted from income—is increasing from $127,200 to $128,700. But on the other end in retirement, high earning retired workers will see the maximum monthly social security stipend increase by $101 to $2,788.

 2018 IRA Contribution Limits to Remain Flat
 
Lest we have too much of a good thing going into 2018, one government-proscribed contribution limit will remain static. The maximum contribution you can make to an individual retirement account (IRA) will stay unchanged at $5,500. (The last time this limit was increased—by $500—was 2013.) The catch-up contribution for savers over 50 will also remain the same at $1,000.
 
Income limits determining eligibility to contribute to a Roth IRA are increasing in 2018, as are income limits determining how much, if any, tax deductions can be taken after contributing to a traditional IRA. More details are available on the IRS website.

 

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Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. RJFS does not provide tax advice. Please consult your tax advisor for your particular situation.

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Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Estes Wealth Strategies is not a registered broker/dealer and is independent of Raymond James Financial Services.

Any opinions in this newsletter are those of Estes Wealth Strategies and John Estes and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice.    

The information provided does not purport to be a comprehensive description of securities, markets, or other developments. This information has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information provided is not a complete summary or statement of all available data necessary for making an investment decision, nor does it constitute a recommendation.