How catch-up contributions can bolster your retirement savings

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In recent years, saving for retirement has become a lot more challenging. It's further complicated by longer life spans, which mean retirees must make their savings last over a greater duration. Not surprisingly, the Employee Benefits Research Institute found in its 2017 Retirement Confidence Survey that only 18% of workers felt "very confident" about having enough money for retirement.
However, there is good news for those ages 50 years or older (or those who will turn 50 during the year). If you think that you will need more money to live in retirement than you currently have and you have been wondering what else you can do to help build your retirement assets, there is a simple tax-law provision that you may not be aware of: IRA catch-up contributions.
If you are eligible, the federal government allows individuals ages 50 years or older (or those who will turn 50 during the year) to contribute an additional amount to their IRA(s) each year beyond the maximum contribution limit. These amounts are commonly referred to as catch-up contributions. "Leveraging the catch-up contribution is a great opportunity for those nearing retirement to potentially repair their balance sheets and enable them to have a better chance of reaching their long-term planning goals," says Debra Greenberg, director, IRA Product Management, Bank of America Merrill Lynch.
If you are eligible to contribute to an IRA and you were late in starting to save for retirement, or if your retirement account value has declined due to economic conditions, you can also take advantage of this opportunity to contribute to your savings now and potentially provide yourself with additional retirement income when you are no longer working.
Traditional* and Roth IRA** contribution limits
  2018 2017
Contribution limit
if you are up to age 50 and will not turn 50 during the year
$5,500 $5,500
Catch-up contribution limit
if you are age 50 or older***
$1,000 $1,000
Total contribution limit
if you are age 50 or older***
$6,500 $6,500
Contribution deadline**** 4/15/19 4/17/18
* Contributions to Traditional IRA accounts may be tax deductible. If you participate in an employer-sponsored retirement plan, the tax laws limit the deductibility of your contributions based on modified adjusted gross income (MAGI) ranges that are published annually and correspond to your federal tax filing status — if your MAGI is less than the lower limit, you are eligible for a full deduction for your contributions; if your MAGI is between the limits, you are eligible for a partial deduction; and if your MAGI is above the upper limit you are not eligible for a deduction. The Traditional IRA MAGI ranges are: $63,000-$73,000 in 2018 and $62,000-$72,000 in 2017 (single and head of household); and $101,000-$121,000 in 2018 and $99,000-$119,000 in 2017 (married filing jointly and qualified widow(er)). If you do not participate in an employer-sponsored retirement plan but your spouse does and your filing status is married filing jointly, the deductibility of your contributions is determined based on the MAGI range of $189,000 - $199,000 in 2018 and $186,000-$196,000 in 2017.
Generally, married couples filing separately are not entitled to a deduction for contributions to Traditional IRAs. However, if you are married and file separately but do not live with your spouse at any time during the year, your maximum deduction is determined as if you were a single filer.
If neither you nor your spouse is covered by an employer retirement plan, the maximum deduction is either $5,500 or $6,500, depending on whether you are age 50 or older at any time during the year to which the contributions relate.
** Whether you are eligible to contribute to a Roth IRA is based on your MAGI. The tax laws limit the eligibility to contribute to a Roth IRA based on MAGI ranges that are published annually and correspond to your federal tax filing status — if your MAGI is less than the lower limit, you are eligible to contribute up to the annual contribution limit for the year; if your MAGI is between the limits, you are eligible to make a partial Roth IRA contribution; and if your MAGI is above the upper limit you are not eligible to contribute to a Roth IRA. The Roth IRA MAGI ranges are: $120,000-$135,000 in 2018 and $118,000-$133,000 in 2017 (single and head of household); and $189,000-$199,000 in 2018 and $186,000-$196,000 in 2017 (married filing jointly and qualified widow(er)).
Generally, married couples filing separately are not entitled to contribute to Roth IRAs. However, if you are married and file separately but do not live with your spouse at any time during the year, your maximum deduction is determined as if you were a single filer.
*** You are treated as being age 50 or older if you will turn age 50 or older at any point during the calendar year to which the contributions relate.
**** You generally have until April 15th of each year to make IRA contributions for the previous year to which the contributions relate. If April 15th falls on a weekend or a holiday, the deadline is typically the next business day.

Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

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