If you’re the type of person who wants to take advantage of every retirement savings opportunity, then we have some good news for you. Beginning in 2019, the annual contribution limit for qualified retirement plans will be increased slightly, allowing you to better prepare for the future while accessing important tax breaks now.
The change applies to qualified retirement accounts, including 401(k), 403(b), most 457 plans, and Thrift Savings Plans (for federal employees). Next year you can contribute $19,000 to this type of account, while enjoying the same tax structure and benefits.
That’s an increase of 500 dollars per year, which might not sound like a lot. But remember, these increases tend to happen every few years, so by the end of your career they do add up.
If you’ve reached age 50, you can also make an additional “catch-up” contribution each year. Currently that limit remains at $6,000, for a total contribution of $25,000 annually.
As for the tax benefits of a qualified retirement plan, any increase in your contributions may also lower your taxable income for the year. This is because you make contributions on a pre-tax basis, and pay taxes on the money later when you take withdrawals in retirement (f you have chosen the Traditional tax structure for your account).
What about those of you who utilize an Individual Retirement Account (IRA)? That contribution limit has also increased, from $5,500 to $6,000 beginning in 2019. And, if you’re making catch-up contributions, you can contribute an additional $1,000 to that account.
A small difference now can add up to a much bigger difference later.
For more help with retirement plan contributions, or financial planning in general, please give us a call. We can answer your questions and help you identify valuable opportunities now, so that you can better prepare for the future.