This past tax season the main question I received from my clients was “What will the new tax law change to my tax return next year?” My software was able to give an estimate based on 2017 data however it did not consider companies updating their withholdings half way through the year. It also did not count people changing withholding or reduction in gift giving, or reduced mortgage interest, or a host of many other variables. With news saying one thing and friends saying something else, knowing what is correct about the changes and what is not correct becomes a guessing game. A recent change has not made much news due to market fluctuations however it can make a significant long-term impact on your retirement.
Starting for Tax Year 2018, the IRS has declared a COLA for certain retirement plans. This is great news if you were maxing out your 401(k), 403(b), most 457, and your TSP; you now have an additional $500 you can add to your pot of gold. This means these have increased their limit from $18,500 to $19,000 for this year. Traditional and ROTH IRAs have also received a $500 increase in their limits taking the max up to $6,000. The “catch-up” bonus of $1,000 for aging past 50 is still in effect and did not get an increase. Curious of your takeaway? If you have the cash flow drop an extra $500 per person through work and save some extra cash from taxes. If you don’t have the extra funds to max out your retirement use 2019 to start building your way to max. Increasing your current donation by $100 in January shouldn’t make a large difference in your budget and steadily increasing will have you maxed out in no time.