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2018 Roth IRA Limits and Roth 401k Limits: One Will Increase

The 2018 Roth IRA limits will not change again this year.

However, the Roth 401k contribution limits will increase by $500. It’s time to start planning your contributions.

The 401k limits and IRA limits are determined based on inflation, but can only increase in $500 increments.

The 2018 social security wage base [1] increased by $1,500.

Roth IRA and Roth 401k Limits

I highlight the Roth IRA and the Roth 401k [2] because they are my favorite retirement plans; the limits for traditional 401ks and IRAs [3] are the same as the Roth 401k and Roth IRAs.

The 2018 limits will stay the same for the traditional IRA. Limits for the traditional 401k will increase. In addition, the increased limits also apply to 403b plans and most 457 plans.

2017 & 2018 Contribution Limits

Here are the official contribution limits from the IRS [4]:

Roth 401k Contributions 2017 2018
Maximum $ 18,000 $ 18,500
Catch-up 50 and over $ 6,000 $ 6,000
Roth IRA Contributions 2017 2018
Maximum $ 5,500 $ 5,500
Catch-up 50 and over $ 1,000 $ 1,000

You can make your 2018 contributions as early as January 1, 2018 for the whole year. If you contribute 2018 Roth IRA money between January 1 and April 17, be sure to designate the calendar year 2018 if you have already contributed the maximum for 2017.

Since the 2018 limits will stay the same for the Roth IRA, if you use automatic investments, you probably won’t have to make any changes. You should contact your HR department to make changes to your Roth 401k deferral rate for 2018 if you want to take advantage of the increase.

To maximize your IRA investments, make sure you aren’t paying extra fees in your IRA. You can transfer your IRA to another broker to avoid annual fees. We use Vanguard for our IRAs.

Roth IRA Income Limits

The income limits for Roth contributions in 2018 went up slightly. You may contribute the full amount to your Roth IRA if your 2018 modified adjusted gross income [5] is below $120,000 for singles ($189,000 for married). You may make partial contributions until your income hits $135,000 ($199,000 for married).

If your income is above that, you cannot contribute to a Roth IRA. If you are interested, there is a workaround called the Backdoor Roth IRA [6] if your income is above the limits.

2017 Contribution Deadlines

The deadline for 2017 IRA contributions is April 17, 2018, the same as the tax deadline [7].

401k contribution deadlines are based on the calendar year. 2017 401k contributions are due at the end of the year.

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