Good news retirement savers: The Internal Revenue Service announced cost-of-living increases in retirement plan contribution limits in 2019.
Annual contribution limits for 401(k)s will increase to $19,000 from $18,500.
And the annual contribution to an IRA, last raised in 2013, rises to $6,000 from $5,500.
“This is another win for investors and savers,” says Stephanie Baca, financial planner at Capstone Global Advisors. “There hasn’t been a cost-of-living increase in the IRA for so long, so this is a great opportunity for so many to be more prepared for retirement.”
Catch-up contributions, available to those age 50 and older, are unchanged at $6,000 for 401(k)s and $1,000 for IRAs.
In addition to 401(k)s, limits on 403(b)s, most 457 plans and the federal government’s Thrift Savings Plan will also increase to $19,000.
Next year, the income tax limits that determine deductible contributions for claiming IRAs, Roth IRAs, and the saver’s credit will also increase.
For example, the income deduction range for taxpayers contributing to a Roth IRA increased to $122,000 to $137,000 for singles and heads of household, up from $120,000 to $135,000. For married couples filing jointly, the income deduction range is $193,000 to $203,000, $189,000 to $199,000.
IRS increases are helpful, says Shane Mason, a certified financial planner at Brooklyn FI, but only if you’re able to contribute the maximum.
He says those who want to continue maxing out their 401(k)s should review their contributions to make sure they’re putting enough away with each paycheck.
Those paid semi-monthly (twice a month or 24 times a year) would have to contribute $792 per paycheck and those paid biweekly (biweekly or 26 times a year) would have to pay $731 per paycheck.
CNNMoney (New York) Posted November 1, 2018: 4:50 pm ET