2 payroll deductions to make right now

Norm Boone / Jan 3, 2018 / Financial Planning

With the new year come changes. For those of us in the workforce: here are 2 quick financial tasks to see to now.

Taking care of these small tasks now counts as a big win - theres a few feathers for your cap. 

 2 Payroll deductions to update right now.png

 

First:

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the saver’s credit, have all increased for 2018. (If you are not covered by a retirement plan at work, your amounts have increased as well.)

Most employees have a proportional amount deducted from their paychecks every pay period. Since the limits have now changed, you will need to adjust your payroll deduction to maximize your contribution.

Contribution limits for all employer payroll deduction plans have increased from 2017 to 2018 [401(k), 403(b) and 457(b)].

 Plan Type

2017 Limits

2018 Limits

401(k), 403(b), 457(b)

$18,000 ($24,000 for 50+)

$18,500 ($24,500 for 50+)

 

Second:

The tax laws are changing for 2018. Brackets are changing. Deductions are changing. Exemptions and credits are changing.

Your total federal tax due for 2018 is therefore likely to be changed from the prior year. Accordingly, it will be advisable to review and update your withholdings for 2018.

You may need to talk with your tax preparer to get a close estimate.

As a reminder:  while it often feels good to get a refund each year, you are essentially lending the government money at no interest.

They are happy to get this free loan, but what is ideal for most individual situations?

The total of your withholdings should equal the amount of taxes you will owe, neither more nor less.

If you are among those of us who are still working, we suggest that you notify your payroll department as soon as possible if you would like to increase your payroll deduction, or if you want to change the amount of your withholdings.

Please let us know if you have any questions.

We wish you the best and most prosperous New Year! Heres to moving forward.

 

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Topics: Financial Planning