IRS announces new bigger retirement plan contribution limits for 2019
Traditional IRA and Roth IRA
$6,000 will be the new contribution limit for Traditional IRAs in 2019. This is up from the previous level of $5,500 which has been at the same level since 2013. This is increase is according to the Internal Revenue Service (IRS) inflation adjustments announcement from today.
New 401(k) Contribution Limits
For those of you who participate in a 401(k) plan you will also be able to increase your maximum contribution in 2019. Taxpayers will be allowed to contribute up to $19,000 before taxes in 2019 into a 401(k), the IRS said. This is a $500 increase from the previous allowable contribution level of $18,500.
Catch-Up Contribution Unchanged:
You may wonder how inflation can be so exact as to always end at the nearest $500 or $1,000. Or maybe I’m just a money nerd to think about these mundane things. The IRS rounds these number after inflation. So, in some years you won’t see the limits change even after inflation. This helps explain why “catch up contribution” – for those 50 years or old are not increasing for 2019. They will be staying level at $1000 for Traditional IRA and ROTH IRA. The Catch-up contribution limits remains at $6000 for 401(k) contributions. We are still waiting for announcements for other 2019 inflation adjustments. This will include important information like federal income-tax brackets and potential changes to the standard deduction. We may also see changes to the person exemption from the estate tax. Unless you are expecting to die (or receive an inheritance) next year this is not as pressing an announcement.
Here are the official Highlights of the changes on the IRS Site.
Super Savers 50+ Can Now Sock Away $32,000 Per Year
If you stack 401(k) Contributions on top of an IRA or ROTH IRA contribution as well as maxing out the catch-up contributions all of a sudden you are at $32,000 per year in allowable savings. This is great news for the vast number of Americans who are behind when it comes to saving for retirement.
Bigger Contributions for the Self Employed:
There is also more good news for small business owners and other self-employed taxpayers. They amount that you can save into a Solo 401(k) or SEP IRA has increased from $55,000 in 2018 to $56,000 in 2019. Actual allowable contributions will be based on the amount they can contribute as employee and employer. This will consider the compensation based on a maximum of $280,000. A $5000 increase over 2018.
Just a quick reminder you can also make catch- up contribution to a Solo 401(k). Whereas there are no catch-up contributions allowed on a SEP IRA. Most likely the typical 50-year-old (or older) business owner will be able to contribute more to a solo 401(k).
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