Social Security and Retirement changes announced for 2018
10-24-2017RetirementThe Social Security Administration (SSA) announced last week that the maximum amount of wages in subject to the 6.2% Social Security tax will rise from $127,200 in 2017 to $128,700 in 2018. The SSA also announced that Social Security beneficiaries will get a 2% increase in benefits in 2018. The average retiree will receive an increase of $27 a month.
| 2017 | 2018 | |
|---|---|---|
| Social Security Wage Maximum | $127,200 | $128,700 |
| Maximum Social Security tax | $7,886.40 | $7,979.40 |
| 401(k) elective deferral | $18,000 | $18,500 |
| 401(k) catch up | $6,000 | $6,000 |
Among the other increases is the amount a worker under full retirement age can earn before he or she has Social Security benefits reduced. The limit increases from $16,920 for 2017 to $17,040 for 2018, after which $1 in benefits is withheld for every $2 earned above the limit.
The Internal Revenue Service (IRS) announced last week that the limit on elective deferral for contributions to 401(k) plans, 403(b) plans, most 457 plans, and the federal government’s Thrift Savings Plan will increase from $18,000 in 2017 to $18,500 for 2018. However, the catch-up contribution limit for those 50 and older remains $6,000.
The ability of taxpayers who are covered by workplace retirement plans to make a deductible individual retirement arrangement (IRA) contribution is phased out for singles and heads of household who have modified adjusted gross incomes (AGIs) between $63,000 and $73,000, a slight increase from last year.
For married couples filing jointly, where the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $101,000 to $121,000 for 2018. These amounts also increased slightly from 2017. When an IRA contributor is not covered by a workplace retirement plan but is married to someone who is, the deduction is phased out if the couple’s income is between $189,000 and $199,000, also an increase from 2017.
For taxpayers making contributions to Roth IRAs, the phaseout range for determining the maximum contribution is $189,000 to $199,000 for married couples filing jointly and $120,000 to $135,000 for singles and heads of household.
The AGI limit for the saver’s credit is $63,000 for married couples filing jointly, $47,250 for heads of household, and $31,500 for single taxpayers and for married individuals filing separately.
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