Are you currently maxing out your 401(k) savings? Or do you utilize your own personal IRA to save for retirement? If so, you will want to make sure to review your contributions and increase the amount starting in 2019. The IRS announced cost of living adjustments for retirement plan contribution limits, and now you are able to save more for your retirement!
The amount you can contribute to your 401(k) or other workplace retirement account was increased from $18,500 to $19,000 per year for 2019. The contribution amount for IRAs was increased to $6,000 per year after being stuck at $5,500 since 2013. Catch up contributions for those who are over 50 years of age remains unchanged at $6,000 for workplace retirement plans and $1,000 for IRAs. If you are a high earner or dedicated saver and your employer retirement plan allows for after-tax contributions, you are able to save a total of $56,000, up from $55,000 in 2018.
In addition to the increased amounts, the income phaseout range increased for eligibility to make Roth IRA contributions. In 2018 the income phaseout range for Roth IRA contributions was $189,000-$199,000 of modified adjusted gross income (for those Married Filing Jointly), but now the range is $193,000-$203,000. Similarly, the income phaseout was increased for those making deductible IRA contributions.
Even if these contribution limits seem unreachable under your own circumstances, it is important to review your contribution rate and at the very least contribute enough to take advantage of any company match. Retirement plans have also been offering auto-increase programs which allows for your contribution rate to increase automatically every year. This can be valuable tool for plan participants and will help you eventually reach the maximum amount.
Below is a chart that outlines all the changes announced by the IRS. If you have any questions about this, please don’t hesitate to contact a CERTIFIED FINANCIAL PLANNER™ at Thrive Wealth Management.