The government have of course made many changes to tax laws over the years, and with the current reforms, it can be difficult to stay on top of all the alterations, adjustments and revised regulations. When it comes to retirement, the changes to contribution limits can be hard to stay abreast of, but it’s essentially good news for retirement savers in 2019. Changes to individual retirement accounts such as 401(k) plans, traditional IRA’s and even ROTH IRA, are all part of the annual inflation adjustments recently made by the IRS. Lower tax bills naturally come as a result of larger retirement contributions and can also mean more income in retirement:
Traditional IRA’S and ROTH IRA’s:
Traditional IRA’s will come with a new contribution limit of $6,000 this year, an increase from $5,500, a figure that has stayed the same since 2013. This increase is as a direct result of the IRS inflation adjustments recently announced.
Revised 401(k) Contribution Limits:
If you have a 401(k) plan, then you will be able to increase your maximum contribution up to $19,000 before taxes in 2019, according to the IRS. The previous allowable contribution level was set at $18,500, making it a $500 increase.
A 401(k) plan is one of the most common employer-sponsored retirement accounts, with a 403(b) being another type that is used predominantly for public school and non-profit employees. 457 plans are more common among government employees. To help you further, here is a list of the increased limits on contributions for several retirement accounts in 2019:
New contribution limits:
- Employees participating in a 401(k), 403(b) and most 457 plans as well as the federal governments Thrift Savings Plan, have had the contribution limit increased from $18,500 to $19,000
- Annual contributions to an IRA – previously having remained the same since 2013 – have seen a limit increase from $5,500 to $6,000
- Remaining unaltered at $6,000, is the catch-up contribution limit (a higher threshold for employees of 50 ad above using these accounts)
Various reports, surveys and studies carried out in recent years, have indicated that US citizens are far from prepared for retirement, with almost half of the entire population believing that their retirement savings will never reach $1 million, despite the fact that more than 30% of Americans expect to need more than that amount to survive on once they stop working.
For more detailed advice and guidance on retirement plans and how changes to the tax law could affect your savings for retirement, make an appointment with your local retirement specialist to discuss matters further.