Now that the calendar has turned you can contribute more money than ever to your retirement accounts! If you are aiming to maximize your contributions, this is the time to make changes to your contribution percentages if you have a 401(k) at work or a monthly draft to your IRA.
New 2019 contribution limits for IRA and 401(k) accounts
The Internal Revenue Service announced in late 2018 new increased contribution limits for your retirement accounts. The new limits, effective now, allow you contribute $500 more to each kind of account than you could in 2018.
Here’s what you need to know…
This is what’s changed
- 401(k) – You are now be able to contribute $19,000 annually beginning in 2019, up from the current limit of $18,500 in 2018.
- IRA – An annual contribution limit of $6,000 is effect for 2019. That’s up from $5,500 in 2018.
Here’s what stays the same
Catch-up contributions for those over age 50 who participate in a 401(k), 403(b), most 457 plans or the federal government’s Thrift Savings Plan remain unchanged from 2018 limits at $6,000.
Why did these changes happen?
This latest adjustment from the IRS comes on the heels of growing inflation. Put simply, the cap on what you can contribute to the most common retirement saving vehicles is pegged to the rate of inflation.
However, things like catch-up contributions aren’t inflation-indexed — and therefore are not subject to a cost-of-living adjustment in the same way that initial contribution limits are. Hence, the lack of an increase you’re seeing there.