Great news if you’re a saver…You’ll be able to contribute more money than ever to your retirement accounts starting in 2019!
New 2019 contribution limits for IRA and 401(k) accounts
The Internal Revenue Service is out with new increased contribution limits for your retirement accounts. The new limits, effective next year, will 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 changing
- 401(k) – You’ll 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 goes into effect in 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 will remain unchanged from 2018 limits at $6,000.
Why are these changes happening now?
This latest announcement 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.