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401(k) Contribution Limit Rising for 2018

by Paul-Martin Foss

The employee contribution limit for 2018 is rising to $18,500, up from $18,000 in 2017. The overall contribution limit, which includes employer contributions and contributions from other sources, is rising from $54,000 to $55,000. That’s good news for employees who choose to take advantage of their company’s 401(k) plans, particularly if they spring for employer matching contributions. That allows them both to put away more money for retirement and to get greater tax advantages.

The new limits are also great news for investors who may have been worried that the new tax reform proposals in Congress were going to drastically reduce 401(k) contribution limits. There were apparently some proposals that would have “paid for” tax cuts elsewhere by imposing contribution limits of $2,400 per year on 401(k) accounts. That would not only have hurt savers and investors but also completely upended the retirement and financial planning industry.

Over 55 million Americans have 401(k) accounts, with a total of $5.1 trillion in assets. That’s why President Trump stated quite clearly that there would be no changes to 401(k) plans on his watch. Trying to take away such a major portion of people’s retirement savings plans would have led to a major voter backlash. It’s hard to believe that anyone in Congress would have thought pissing off 55 million voters would be a great idea, but that’s Congress for you.

Still, there’s no guarantee that Congress or future Presidents won’t decide to do something to 401(k) accounts in the future. After all, the idea of commandeering 401(k) accounts and forcing those assets into government bonds is an idea that continues to crop up from time to time. So enjoy that 401(k) while you have it, but be prepared to get your money out if it looks like the government is eyeing a takeover.

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