What’s the quickest and easiest way for you to save thousands in taxes and have more money to spend?

by JD Miller on May 7, 2015

JD Miller CPA
The Trusted Financial Planner

Save more in your 401k, 403b or 457 plan and in your IRA or Roth IRA in 2018!

Beginning January 1, 2018, you can get a bigger tax deduction and save more in your 401k, 403b and 457 plan. The maximum amount you can save in your 401k, 403b and 457 plan has been increased.

For your 401k plan, your company can also save more for you in the company profit sharing plan.  It can be done in two ways:

  1. Matching some of your contributions to your 401k plan.
  2. Allocating a portion of the profit sharing plan contribution to your 401k plan account.

Either or both can give you more money to spend.  Both are not taxable to you until you withdraw your money to spend.  It’s like “found money”.  And what you earn on the money in your 401k plan account is not taxable to you until you withdraw your money to spend.

And, while you should continue saving as much as you can in your Roth IRA or your regular IRA each year, the maximum amounts that can be saved in these tax favored IRAs have not been increased. They stay the same for 2018.

401k, 403b and 457 plan contributions

For all three plans, the 401k, 403b and the 457 plans, there are two maximum annual contribution amounts.  These include the maximum annual contribution amount for all IRA owners and the additional contribution amount for those IRA owners 50 years of age or older.

The maximum annual contribution increased to $18,500.  For those 50 years of age and older, the additional contribution amount remains unchanged at $6,000.

The maximum annual contribution amount for those under 50 years of age is now $18,500.  The maximum annual contribution amount for those 50 years of age or older has increased to $24,500.

Defined contribution plans and defined benefit plans

The maximum annual contribution by an employer to a defined contribution plan has increased to $55,000 per employee.

For defined benefit plans, the maximum salary for plan contributions has increased to $275,000 per employee.

Maximum contribution amounts for Roth IRAs and IRAs

There are two maximum annual contribution amounts for Roth IRA and IRA accounts. These include the:

  1. $5,500 maximum annual contribution amount for all IRA owners, and
  2. additional $1,000 contribution amount for those IRA owners 50 years of age or older.

These annual contribution amounts remain unchanged for 2018. The maximum annual contribution remains at $5,500. For those 50 years of age and older, the additional contribution amount remains at $1,000.

For both the Roth IRA and the IRA, the amounts contributed cannot exceed the earned income of the IRA owner for the year.

 

{ 2 comments… read them below or add one }

Peter Au November 9, 2015 at 8:56 pm

Hi JD,

It was nice meeting you last Friday at the CalCPA event. Thank you for share about IRA 1 time rollover rules and how to avoid it.

Best,
Peter Au

Reply

JD Miller November 9, 2015 at 9:20 pm

Hi Peter,

I look forward to learning more about how you see your practice developing …beyond family and friends.

Actually, that’s a great place to start …family and friends. But you must help them.

The best clients you will ever have will come to you by referral. But you must teach those who will refer to you WIIFM, what’s in it for the person they are referring to you (M).

Here’s a link to a great TedTalk by Simon Sinek, Start with Why.
https://www.youtube.com/watch?v=sioZd3AxmnE

It should get you thinking about what a person is is referred to you will get by working with you. You may be offering similar services to many other CPAs, but your offer is difference. What will they get that will be different that what they could get from another CPA.

In the case of Apple computer, as Simon Sinek explains, other companies make and sell computers. But they don’t offer the “Apple experience”, the “Apple Community”.

When I receive referrals, my prospects don’t often know what they want, other than they want something like what my clients are already getting.

Essentially, my clients know that they will never have to lower their standard of living and that they will never have to worry about their money not being there when they want to spend it.

What is it that your clients will experience? The services you offer may be similar to those of many other CPAs, but you present them differently.

Look forward to seeing you again at another meeting, Peter.

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