To help boost savings resolutions in 2019, consider increasing your contributions to retirement plans, as the IRS has raised the limits.
Last Thursday, the department released new contribution limits for employer-sponsored retirement plans like 401(k)s. Additionally, after several years without an increase, contributions for Individual Retirement Arrangement (IRA) accounts have also risen.
Major changes are summarized in the tables below:
Furthermore, certain income limitations for eligibility to contribute to IRA accounts were also revised upward. The IRS released the following regarding this:
Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply). Here are the phase-out ranges for 2019:
– For single taxpayers covered by a workplace retirement plan, the phase-out range is $64,000 to $74,000, up from $63,000 to $73,000.
– For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $103,000 to $123,000, up from $101,000 to $121,000.
– For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $193,000 and $203,000, up from $189,000 and $199,000.
– For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
The income phase-out range for taxpayers making contributions to a Roth IRA is $122,000 to $137,000 for singles and heads of household, up from $120,000 to $135,000. For married couples filing jointly, the income phase-out range is $193,000 to $203,000, up from $189,000 to $199,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
With the end of the year approaching, knowing limit laws in advance helps you prepare to make any necessary changes to your elections and take advantage of a year’s worth of time to max out contributions. Plan accordingly.