Did you know that November 10, 1981, marks the birth of the modern 401(k) plan? Happy Birthday, 401K!
And just in time for this anniversary, we receive the gift of IRA contribution limits going up for the first time since 2013.
Starting in 2019, Roth IRA Annual Contribution Limits have increased from $5,500 to $6,000 and for those over 50, catch-up contributions were raised from $6000 to $7,000 per year.
The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $18,500 to $19,000. [i]
The income phase-out ranges for IRAs are also increasing for the 2019 tax year. Basically, if you are covered by a retirement plan through work, the amount of your deductible contribution phases out. Those limits went up to:
- $64,000 to $74,000 (up $1,000 from last year) for single taxpayers
- $103,000 to $123,000 (
up$2,000) for married couples filing jointly, where the IRA contributor is covered by a workplace retirement plan
- $193,000 to $203,000 (
up$4,000) for married couples filing jointly, where the IRA contributor is not covered by a workplace plan but their spouse is
There are also phaseout limits for what you can contribute to a Roth IRA. For 2019, the new phaseout ranges will be:
- $122,000 to $137,000 (up $2,000 from last year) for single taxpayers
- $193,000 to $203,000 (up $4,000) for married couples filing jointly
The IRS puts limits on the amount you can contribute to these accounts because the money gets preferential tax treatment.
Some self-employed plans get a boost too. The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $12,500 to $13,000.
Make sure you adjust your savings amounts at work and talk with your advisor if you would like to max out your savings amount.
Bryan D Beatty, CFP® AIF®