Boost Your Retirement Savings: Contribution Limits Rise for the First Time in 6 Years

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This is the time to start saving more for retirement and ramp up how much money you set aside for the future, thanks to changes from the Treasury Department. After six years of sitting at $5,500, the maximum amount you can contribute to your individual retirement account will rise to $6,000 in 2019. The amount you can contribute to your 401k or workplace retirement plan will increase from $18,500 this year to $19,000 next year.

Keep reading to learn the details of these tax changes and the respective tax adjustments you’ll need to make.

Workers Approaching Retirement Can Save Up to $32,000

The catch-up contribution limits for people over 50 remained unchanged for 2019. Still, it allows aggressive savers to stash a good chunk of money as they near retirement. This is how you can max-out your annual contribution:

  • 401k: $19,000 + $6,000 catch-up contribution
  • IRA: $6,000 + $1,000 catch-up contribution

Workers under 50 can save a maximum of $25,000.

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The Overall Tax-Advantaged Limit Is Higher, Too

Self-employed workers using Solo 401ks and SEP IRAs and those who receive matching contributions from their employers have a higher overall maximum: The defined contribution plan limit has increased to $56,000 from $55,000.

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Changes for SIMPLE Retirement Accounts and Defined Benefit Plans

Other options that are seeing a rise in contribution limits include SIMPLE retirement accounts, which go from $12,500 to $13,000 in 2019.

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High earners who have access to defined benefit plans will see the limits go from $220,000 to $225,000 for 2019.

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Bigger Income Limits for the Saver’s Tax Credit

And for low- and moderate-income workers, there’s a bright spot, too. The income limits are rising for the saver’s tax credit. The limit is up $1,000 to $64,000 for married couples filing jointly for 2019; up $750 to $48,000 for heads of household; and up $500 to $32,000 for singles or married filing separately.

Ultimately, the lesson here is to cut out those unnecessary expenses and start saving as much as you can now to take advantage of these rising limits.

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