Have you ever wondered how much money you can put into each type of retirement account? Do you want to ensure you are maximizing your potential tax-benefits in retirement? The answer isn’t complicated, but it has changed for 2019. Starting January 1st, you can now contribute more than ever before to certain types of retirement accounts.
The first retirement account that got an upgrade for 2019 is employer retirement plans such as your 401(k), 403(b), or 457 Plan. In previous years, the maximum contribution was $18,500. In 2019, the limit has been increased by $500. You can now contribute up to $19,000 per year into your employer retirement accounts. The $6,000 catch-up contribution for those over 50 years old stays the same. If you are above 50 years of age, you can contribute up to $25,000 per year.
The next retirement account contribution limit that was increased was the Individual Retirement Account (IRA). The previous contribution limit to IRAs was $5,500 per year. In 2019, this will rise to $6,000 per year. The $1,000 catch-up contribution for those over 50 years old remains unchanged. You can now contribute up to $7,000 per year if you are older than 50 years old.
It is important to keep in mind that there are deduction limits for IRA accounts as well. The income constraints for deducting your IRA contributions have increased as well. Please visit the IRS website for more detailed information regarding these deductibility limits.
Maximizing the amount of money you contribute to each type of retirement account can have a huge effect on your retirement. It is important to have cash available in all three tax pockets. If you haven’t read about the tax pockets, check out our article from September 2018. As always, if you have any questions or need advice in maximizing contributions to your retirement accounts, don’t hesitate to give us a call!