The Power of Increased Retirement Contributions
Recent announcements from the Internal Revenue Service (IRS) have provided a significant boost to those planning for retirement. With cost of living adjustments, contribution limits for several retirement-related plans are on the rise for 2019. This change offers a unique opportunity to maximize retirement savings. But what do these updates mean for your financial future?
Key Increases You Need to Know
As of 2019, the annual contribution limit for 401(k) plans has risen from $18,500 to $19,000. This increase also applies to 403(b)s, most 457 plans, and the federal government’s Thrift Savings Plan. For Individual Retirement Accounts (IRAs), the contribution limit has increased from $5,500 to $6,000.
While these changes seem modest, they are critical in keeping pace with inflation and market growth.
Impact on Retirement Planning
“This is another win for investors and savers,” says Stephanie Bacak, a financial planner at Capstone Global Advisors. With no cost of living adjustments to the IRA in recent years, this boost serves as a much-needed opportunity for many individuals to enhance their retirement readiness.
Those aged 50 and over can still take advantage of catch-up contributions, with limits remaining at $6,000 for 401(k)s and $1,000 for IRAs.
Maximizing Your Contributions
Financial planner Shane Mason suggests revisiting your current contributions if you aim to maximize your 401(k). For those paid semi-monthly, a contribution of $792 per paycheck is recommended. If paid biweekly, setting aside $731 will ensure you’re maximizing the new limit.
Adjusting your finances early can result in significant compounded growth over time.
Income Phase-Out Range Adjustments
The IRS has also increased the income phase-out ranges for contributions to Roth IRAs and contributions eligible for tax deductions. For single filers, the range is now $122,000 to $137,000. Married couples filing jointly will see a range from $193,000 to $203,000.
These adjustments widen eligibility, allowing more people to benefit from Roth IRA tax advantages.
Have You Changed Your Retirement Strategy?
With the new limits in place, it might be worthwhile to reassess your retirement saving strategies. If maximizing your contributions directly translates to increased financial security in retirement, where can adjustments be made?
Frequently Asked Questions
Q: What are the new 401(k) contribution limits?
A: The limit has risen to $19,000 for 2019.
Q: Have IRA contribution limits changed?
A: Yes, they have increased to $6,000.
Q: Can I still make catch-up contributions?
A: Yes, the limits remain $6,000 for 401(k)s and $1,000 for IRAs for those 50 and over.
Pro Tip: Review your retirement plan contributions annually to ensure alignment with IRS increases.
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