The IRS has recently announced that you can contribute more to your retirement savings accounts in 2019.
Effective November 1, 2018, the IRA contribution limit has increased due to inflation adjustments. This limit increase will apply to accounts such as: 401(k) plans, Traditional IRAs, and Roth IRAs.1 Keep these new adjustments in mind as you think about your retirement planning for the new year and upcoming tax season.
Employer 401(k) contribution limits
Taxpayers will now be able to contribute up to $19,000 into their: 401(k), 403(b), and most 457 plans before the start of the 2018 tax season.2 This is a $500 increase from the previous $18,500 limit. Although $19,000 is the limit for deferred pre-taxed earnings, the overall limit increased $1,000 from $55,000 to $56,000 for 2019.2 The overall limit does include the employer contributions to the account and is $56,000 or 100% of the salary, whichever is less.
Self-Employed 401(k) contribution limits
Funding for a 401(k) plan is available to those who are self-employed; these contribution limits are the same as above. Contributions depend on the amount business owners can contribute both as an employee and as an employer and is based on a maximum of $280,000 compensation.3
Traditional IRA and Roth IRA
For the 2019 year, the new contribution limit for both IRAs will increase from $5,500 to $6,000; this is the first increase since 2013.2 Taxpayers who participate in their workplace retirement plan with an adjusted gross income below $64,000 for singles, or $103,000 for married couples, are eligible to make a tax-deductible contribution to an IRA. This is a $1,000 increase for singles and a $2,000 increase for married couples from 2018.2
Don’t have an IRA? Check out our financial calculator to help you determine if a Traditional IRA or a Roth IRA is better for your financial needs.
Health Savings (HSA) contribution limits
For HSA accountholders, the contribution limit increased by $50 to $3,500 for the 2019 year. For qualifying family plans, the overall limit also increased by $1,000 for a $7,000 total annual savings.2
It’s important to take care of yourself and your family’s wellbeing. Consider looking at our HSA page to see if you qualify.
“Catch-Up” contribution limits
Those who are 50+ years old are eligible for an additional “catch-up” contribution for an IRA and 401(k) plan. An additional $1,000 can be added to an IRA plan for a total annual contribution of $7,000, and an additional $6,000 can be added to 401(k) plans for a total of $25,000 total contribution; these both remain unchanged from last year.3
Looking to save even more? Those over 50 years of age may want to consider stacking 401(k) contributions on top of a Traditional IRA or Roth IRA to max out the “catch-up” contributions for a $32,000 per year net savings.3
Those 55+ and older can add an additional $1,000 to an HSA plan for a total of $4,500 for singles or $8,000 for families annually.2
Planning for your future
In a 2018 study, a surprising 21% of Americans have nothing saved for retirement and another 10% have less than $5,000 saved in a 401(k) plan.4 Retirement will be here before you know it and it’s important to be financially prepared for all of life’s unknowns.
Determining how much to save for retirement depends on one’s retirement intentions, such as: future home-living situation, future events, and, of course, the difficult to plan for medical expenses and health care costs. According to MarketWatch, an average retired 65-year-old couple could expect to spend a total of $280,000 alone for medical expenses, including Medicare coverage, co-pays, and medications.
If you’d like help getting started or simply want to make sure you’re on the right track, we offer Retirement Planning Seminars throughout the year. View our next one on our events page. You can also schedule an appointment with our Investment Services CFS Representatives*. The earlier you start, the more you’ll have when it’s time to retire.