What is the maximum amount for 2018 that an employee may elect to defer to a 401(k) or 403(b) plan?

What is the maximum amount for 2018 that an employee may elect to defer to a 401(k) or 403(b) plan?

• A. $15,000
• B. $15,500
• C. $16,500
• D. $18,500

Answer: (D)

In 2018, the maximum amount an employee could elect to defer to a 401(k) or 403(b) plan was $18,500. This limit is set by the Internal Revenue Service (IRS) and is adjusted periodically for inflation. The increased limit reflects the government's attempt to encourage retirement savings, allowing participants to set aside more of their earnings in tax-advantaged accounts. The contribution limit applies to elective deferrals made by employees, representing the money taken from their paychecks and deposited into these retirement accounts. It is key for employees to be aware of these limits so they can maximize their retirement savings potential while staying within the regulatory framework. The other choices reflect outdated or incorrect limits for that tax year. Understanding the historical context and regulations related to retirement contributions is essential for accurate financial planning and compliance with IRS guidelines.

In 2018, the maximum amount an employee could elect to defer to a 401(k) or 403(b) plan was $18,500. This limit is set by the Internal Revenue Service (IRS) and is adjusted periodically for inflation. The increased limit reflects the government's attempt to encourage retirement savings, allowing participants to set aside more of their earnings in tax-advantaged accounts.

The contribution limit applies to elective deferrals made by employees, representing the money taken from their paychecks and deposited into these retirement accounts. It is key for employees to be aware of these limits so they can maximize their retirement savings potential while staying within the regulatory framework.

The other choices reflect outdated or incorrect limits for that tax year. Understanding the historical context and regulations related to retirement contributions is essential for accurate financial planning and compliance with IRS guidelines.