New Year, New Limits

In 2019, the IRS will allow you to save more for retirement than in prior years. Contribution limits for IRA accounts are increasing for the first time since 2013.  While 401(k) contributions increased $500 last year, they held steady at $18,000 between 2015-2017. The base contribution limits increased, but the catch-up provisions for those age 50 and over remained the same. Savers over 50 can save more due to the base rate increase though. Health savings account (HSA) limits also increased slightly, and workers can earn more while still remaining eligible to make ROTH IRA contributions.

Here is the run down. This year, you can contribute $6,000 to an IRA versus $5,500 for the past six years. Savers over 50 still get a $1,000 catch-up allowance, which means they can contribute $7,000 to an IRA versus $6,500 last year. Employees with 401(k), 403(b), and most 457 plans may now defer up to $19,000 in to these plans. Here again, the 50+ catch-up allowance remains at $6,000, meaning these savers can defer up to $25,000 in 2019.

SIMPLE IRAs, popular with small employers, get a boost as well. Employees can contribute up to $13,000, or $16,000 if 50+, in 2019.

The employee wage base allowed for defined contribution plan limits increases from $275,000 to $280,000. This means that the max defined contribution plan limit (employee + employer contributions) increases from $54,000 to $55,000.

Health Savings Accounts (HSAs) get a tiny increase in 2019. Savers with HSA eligible single health plans can contribute $3,500, and the limit for family plans increases to $7,000. The catch-up here remains $1,000 and applies only to those age 55 or older.

The income phaseout ranges for ROTH IRA contribution eligibility were also increased. Taxpayers with Adjusted Gross Incomes (AGI) below the bottom of the phaseout range can make full ROTH IRA contributions with the eligible amount decreasing to zero as AGI approaches the top of the range. Remember there is no income limits for converting traditional IRA funds to ROTH and paying income tax on the converted amount. There are also no income limits for ROTH 401(k) contributions, if you employer’s plan allows them.

If saving the max is your goal be sure to adjust your salary deferral amounts to hit the max in 2019. If you turn 50 this year, don’t forget to start taking advantage of the catch-up contribution allowances. Happy saving.


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