The U.S. Treasury Department recently announced inflation-adjusted figures for retirement account savings. That means you can now save more for retirement in 2019.
Individual Retirement Account (IRA) contributions up to $6,000 are allowed in 2019. That’s a bump of $500, after six years stuck at $5,500. The annual contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan, is now $19,000 for 2019. For people 50 years or older, the “catch-up” annual limit is $25,000 for workplace plans and $7,000 for IRAs.
Pre-tax contributions to your 401(k) plan lower your taxable income in the year of the contribution. For example, if you earn $60,000 this year and contribute $15,000 to your 401(k), your taxable income will be reduced to $45,000. This allows tax-deferred growth on your investment; any pre-tax contributions you make, plus any gains from that investment, will not be taxed until you start taking distributions in retirement.
Save More for Retirement in 2019: Remember, too, you can make changes to your 401(k) election at any time during the year, not just during your company’s open enrollment. Talk with your financial planner if you have questions, want to open a new account, or are considering making changes to the amount you have been saving.