Know the 2018 IRS contribution limits

The Internal Revenue Service (IRS) sets limits on the amount you can contribute to workplace plans—401(k), 403(b), and 457 plans—each year. 
  

Article highlights
  

  • Aim for the 10%
  • Save more after 50
  • Catching up on savings

Contribution limits for 2018

For 2018, the contribution limit increased to $18,500. The catch-up contribution limit (for those over 50 years old) stayed the same, so you can save an additional $6,000, for an annual total of $24,500, if your plan allows. The limit for governmental 457 plans is separate from the limit for 401(k) and 403(b) plans, so if your employer offers multiple types of plans, you can contribute to the limit in the governmental 457 plan and also in the 401(k) or 403(b) plan.

Consider saving 10%

One rule of thumb is to contribute at least 10% of your income to your plan each year. Some experts suggest saving even more.

You can start by saving 6% of your pay and increasing it by 2% to 3% each year until you reach 10% or more. If possible, always contribute enough to get the full company match.

When you make pretax contributions to your plan, you lower your taxable income and reduce your tax bill. But your take-home pay isn’t reduced by as much as you're saving. For example, say you’re in the 25% tax bracket and you make a $200 contribution to your plan each paycheck. You reduce your take-home pay by only $150.

  

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Save more if you’re 50 or over

You'll want to live well in retirement. Depending on your plan, catch-up contributions let you contribute more money to your workplace retirement plan after age 50. You're eligible on January 1 of the year you turn 50, no matter how late in the year your birthday falls.
 

Learn more about catch-up contributions.
  

 

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This material is provided by The Lincoln National Life Insurance Company, Fort Wayne, IN, and, in New York, Lincoln Life & Annuity Company of New York, Syracuse, NY and their applicable affiliates (collectively referred to as “Lincoln”). This material is intended for general use with the public. Lincoln does not provide investment advice, and this material is not intended to provide investment advice. Lincoln has financial interests that are served by the sale of Lincoln programs, products and services.