Earlier this month, the Internal Revenue Service (IRS) made their annual announcement regarding changes to maximum contribution limits for the coming year. For those who have not yet started saving for retirement or who are looking to get ahead, 2019 can be your year to reach your savings goals. Here is a breakdown of the two IRS updates and how you can make them work for your retirement savings plan.
For the first time in five years, the IRS has increased the maximum IRA contribution limit by $500. Next year, you can contribute a maximum of $6,000 to your IRA, making 2019 a great year to consider starting one.
As in previous years, the IRS has increased the maximum 401k contribution limit for employees on an employer 401k plan by $500. In 2019, you will be able to contribute a maximum of $19,000 to your employee 401k plan, up from $18,500 in 2018. No matter where you are on your retirement savings journey, maximizing your 401k contribution as soon as you are able is a great way to reach or even surpass your savings goals.
Unchanged in 2019 are the maximum “catch up” contributions for individuals 50 years and older, which remain $1,000 for IRA and $6,000 for 401k.
Whether or not you decide to max out your IRA and 401k contributions in 2019, any increase to your annual contribution can help you get closer to your retirement savings goals. Even increasing by one percent next year can help you stay the course to retirement.
Another way to get closer to your retirement savings goal in 2019 is to increase your 401k contribution to your employer’s maximum match. Typically, employers that offer 401k plans will match their employees’ 401k contributions up to an average of 2-4 percent. Making sure your annual contribution at least matches this amount is essentially putting away free money toward retirement. Consider too that this matched amount goes toward your maximum annual contribution of $19,000, so increasing to your employer’s maximum match will get you that much closer to maximizing your contribution for 2019.
Now that we’ve rung in the New Year, remember to take a look back at your 2018 goals. Did you save as much as you had hoped? Were there opportunities to save that you can take advantage of this year? As you navigate through 2019, being flexible can help you stay on track to your savings goals. When chances to save a little extra arise, consider putting it toward your 401k or IRA.
You can continue to make 2018 IRA contributions until April 15, 2019, so consider how the IRS contribution limit increases can help you get closer to your goals in 2019.