Increase in 2019 Retirement Plan Contribution Limits for 401 (k)s

federal workers - Aubrey Lovegrove

Good news! You all have an opportunity to save more on retirement next year. The IRS announced the increment of the contribution limits for the retirement accounts in the tax year 2019. There are also numerous changes put in place that will help savers to save more with time.

For the past six years, individuals were only allowed to save up to $5,500 in their Individual Retirement Account, but with the changes, the amount will hike to $6,000 in 2019. That is not all; the amount that one can contribute to the 4O1(k) will increase from $118,500 to $19,000. The catch-up contribution for people who are 50 years and above, however, remains the same at $6,000 for workplace plans and $1,000 for IRAs.

This will only mean one thing; the high earners and the super-savers aged 50 and above will be able to save up to $32,000 in these tax-advantaged accounts.  If your employer allows for after-tax contributions, or if you are self-employed, you have a chance to save more. The plan contribution limits generally will move from $55,000 to $56,000.

Are the plan limits attainable? Take a scenario of 2017 where 13% of the workers with retirement plans saved up to the then maximum limit of $18,000/$24,000. In saving plans providing catch-up contributions, 14% of the workers aged 50 and above took advantage of the opportunity and saved more.

Here is an outline of the numbers;

4O1(k)s – The yearly contribution limit for workers who participate in 4O1(k),403(b), 457 plans and the federal government’s Thrift Savings Plan is $19,000 for 2019. This is a $500 increment from 2018. You can make changes to your 4O1(k) at any time of the year without having to wait for the enrollment season.

The 4O1 (k) catch-up – the limit for workers aged 50 and above remains at $6,000 in 2019.

SEP IRAs and Solo 4O1 (k) s – for the self-employed and small business owners, the amount they can save in this plan increases from $55,000 this year to $56,000 in 2019. This, however, depends on their contribution as employers. The amount of compensation used in the calculation of savings also rises from $275,000 to $280,000.

Aftertax 4O1 k) contributions – if your boss consents to after-tax contributions to 4O1(k), you will be able to save up to $56,000 in 2019.  This includes your $19,000 salary deferrals and any employer contribution.

The SIMPLE – the limit on these retirement accounts will increase from $12,500 to $13,000 in 2019. The catch-up limit on this plan will, however, remain at $3,000.

Defied Benefit Plans – the limit on the yearly benefit of this saving plan increases from $220,000 to $225,000 in 2019.

Individual Retirement Accounts –the annual contributions to this account increases from $5,500 to $6,000, but the catch-contribution will remain at $1, 000.

Deductible IRA Phase-Outs – the deduction for taxpayers to IRA is exempted for the singles and heads of households, who have a workplace retirement plan and have an income of $64,000 and $74,000 in 2019. This is an increase from $63,000 and $73,000 in 2018. The amount for married individuals fulfilling similar requirements increases from $90,000 ad $121,000 income phase-out to $103,000 and $123,000.

The deduction phase-out income for individuals who are married to people who are covered by a workplace retirement plan and they are not increases from $189,000 and $199,000 to $193,000 and $203,000.

Roth IRA Phase-Outs – the AGI phase out for married couples contributing to Roth IRA jointly will increase from a range of $189,000 to $199,000 to a range of $193,000 to $203,000. For the singles, the amount range will move to $122,000 to $137,000 from $120,000 to $135,000 in 2018.

Saver’s credit – the amount for married couples in this plan will increase from $63,000 to $64,000, $47,250 to $48,000 for heads of households and $31,500 to $32,000 from singles and couples who file separately.

QLACS –the limit of the amount you can invest in a longevity annuity contract will remain at $130,000.

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