Uncover more opportunities to benefit from retirement planning.
- While the tax act left many of the rules and laws pertaining to retirement plans unchanged, overall tax rates were lowered and deductions changed.
- Given this new landscape, there may be additional opportunities and new twists to be mindful of when planning for retirement in the most tax-efficient manner.
- It’s important to continue to work with your advisors to be sure your retirement planning is up to date in light of the tax law changes.
The 2017 Tax Cuts and Jobs Act (the Act) left many of the rules and laws pertaining to retirement planning unchanged. As a result, taxpayers planning for retirement who utilize qualified savings plans and retirement accounts continue to receive the same tax benefits and incentives to save for retirement. However, the Act did change the tax landscape for many by lowering overall tax rates for individuals and businesses and changing deductions. Given this new landscape, there are additional opportunities and new twists for taxpayers to be mindful of in order to take full advantage of planning for retirement in the most tax-efficient manner.
Retirement savings plans remain unchanged
Over the past 50 years, there has been a dramatic shift in funding retirement for the average American. Most people rely on savings and few have pensions available to them. One of the most common ways to save is through a retirement savings plan offered by your employer; the most common being the 401(k) plan. These plans are designed to incent you to save every year, often with contributions from your employer so that you can maintain a comfortable lifestyle in retirement.
As various proposals to the new tax law came about in late 2017, one that received much attention was a proposal to limit the amount of pre-tax salary deferrals employees could make to their 401(k) plans.The good news is that in the end, the allowable pre-tax 401(k) salary deferral limits were not changed. Annual contributions to 401(k) accounts remain indexed for inflation and, in 2019, increased by $1,000 to $19,000. There was no change to the annual “catch-up” contribution amount of $6,000 for individuals aged 50 and over, regardless of income. There is no lifetime limit on contributions.
Please see important disclosures at the end of the article.
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