I can’t believe I am writing about 2019 already. Time really does fly. I hope everyone had a great year thus far. Let’s gear up for an even better 2019! One way to help make 2019 your best year yet is to stay ahead of your finances. Every year, the IRS determines if they should adjust the contribution limits on retirement focused plans. They’ll look at inflation, cost of living, and several other metrics to determine where they should allow for more tax deferral. The 2019 figures have recently been released. Therefore, I have compiled the information to help you prepare for the changes you can (and should) make moving forward.
Below I’ll list out individually the changes for several important items.
You can now contribute $19,000 into a qualified 401(k) plan pre-tax in 2019. This is an increase of $500 from 2018’s limit of $18,500. Unchanged from 2018, however, is the age 50 (or older) catch-up provision of $6,000. Thus, if you maximize your 401(k) contributions and are age 50+, the total you can personally contribute is $25,000 (vs. $24,500 today). The same limits apply to a Roth 401(k) plan as well.
Annual Qualified Plan Limits:
$19,000 is the maximum an individual can contribute into a pre-tax or Roth 401(k). However, the total limit of contributions to a defined benefit retirement plan is now $56,000, up from $55,000. What else gets calculated in these figures? Included in the $56,000 limit is employer match dollars and employee after-tax contributions. Additionally, this has the same extra $6,000 age 50 or older catch-up on top of the $56,000 contribution limit.
As for IRAs and Roth IRAs, here we finally get some help. The limit for the past six years has been $5,500 (if you’re under 50 years old). For calendar year 2019, the IRS is increasing this threshold an extra $500 to an even $6,000 per individual. Again, no change to the $1,000 catch-up for being 50 or older.
IRA & Roth Income Limits:
Also increased is the new income limit for contributing to a Traditional IRA if participating in an employer sponsored plan. If you’re single, this amount increases $1,000 to $64,000 and $2,000 for married filing jointly to $123,000. Let’s say you are not covered under an employer sponsored 401(k), but your spouse is covered. There are some increases there as well. In this circumstance, your threshold for taking a full deduction has increased $4,000 to $193,000. This is where the phase out begins and completely phases out at $203,000. Additionally for Roth IRA’s, the income limit to contribute to a qualified Roth IRA is set to increase. This amount will be $2,000 for single filers and $4,000 for married filers. Therefore, if you are single and make under $122,000, or married and make under $193,000, you can still make a full contribution to a Roth IRA.
There will also be a small increase in what can be contributed to those “oh-so-valuable” Flexible and Health Care Savings accounts. Your FSA limit went up $50 to $2,700 for 2019. The Health Care Savings account contribution limit increased to $3,500 if on a single health care plan and $7,000 for a family plan. It is important to remember, unlike your 401(k), this limit does include your employer contributions into your plan (if they make one).
According to a (How America Saves), 13% of employees with retirement plans actually contribute to the limit. So if it feels like you’ll never get there, know that these limits are reachable. They go a long way to helping secure a comfortable retirement!
Now, you’re armed with the New Year’s contribution limits. What do you do with it? I recommend a good end of year check-in with your financial planner. See how this information plays into your savings strategy. These resources can lower taxes and keep you in line for your retirement goals. Working closely with someone for help calibrating is a sure fire way to ensure you are on the right track for 2019.