It seems 2019 will be a year for setting aside more for your retirement as the IRS has announced the allowance of higher retirement plan contribution limits for 401(k)s and such savings accounts. These new limits for contributing will allow you to save even more for retirement than in previous years.
In fact, this is the first time since 2013 that such limits for IRA accounts will be allowed to increase. Because the Treasury Department’s announcement of inflation-adjusted figures, there will be a lot of changes for retirement account savings this year, helping those who save to save even more.
The amount you can contribute to your IRA is going to be bumped up to six thousand dollars after seemingly staying stuck at $5500. Contributions to your 401(k) or similar workplace retirement plan will go from $18.5 thousand to an even nineteen thousand in 2019.
However, if you’re fifty or older, catch-up contributions will stay the same at a thousand dollars for IRAs and six thousand dollars for workplace plans. what this means is that those who are high earners or super savers aged fifty and over can put away thirty-two thousand in the accounts which are tax-advantaged. If you’re self-employed or your employer allows after-tax contributions, you’ll be able to save even more.
Overall, the defined contribution limit per plan moves up a thousand dollars from fifty-five thousand to fifty-six thousand.
If you are wondering if these numbers seem reachable, remember that thirteen percent of employees with workplace retirement plans during 2017 managed to save the maximum amount which, according to Vanguard’s How America Saves, was then eighteen thousand and twenty-four thousand. In addition, fourteen percent of those aged fifty and older were able to take advantage of the extra savings opportunity as well.
To recap, this year, you will be able to contribute six thousand dollars to an IRA, five hundred dollars more than the last six years. Those over fifty will get a thousand dollar catch-up allowance, meaning they will be able to contribute seven thousand dollars to an IRA, also five hundred dollars more than last year. This also means that employees with workplace retirement plans will be able to defer up to nineteen thousand dollars to their 401(k), 403(b), and most 457 plans. For the over fifty crowd, this means they will be able to defer up to twenty-five thousand dollars in 2019.
Furthermore, simple IRAs, which are more popular with small employers, will also get a boost. Their employees will be able to contribute up to thirteen thousand and their fifty and over employees will be able to contribute up to sixteen thousand dollars in 2019.
Even Health Savings Accounts (HSAs) will get a small increase this year as well. Those with eligible plans will be able to contribute thirty-five hundred dollars with the family plan increasing to twice that amount. The catch-up in this category, however, is for those aged fifty-five and over and remains at a thousand dollars.
If you want to take advantage of these increases, be sure to change your deferral amounts. This is definitely the year for maximizing your savings. If you are turning fifty, don’t forget you can take advantage of the catch-up this year as well!