2019 401k Plans Limits – Financial Planning Buffalo NY

Here’s some welcome news for people putting money away for retirement: The IRS has raised the 2019 contribution limits for various types of retirement savings accounts and for health savings accounts.

If you participate in a 401(k) or similar plan, you should keep the new limits in mind as you think about your cash flow and financial planning for 2019.

The IRS announced  that the contribution limits for both workplace retirement plans and individual retirement accounts (IRAs) will increase in 2019.

The base contribution limit for the following four types of workplace retirement accounts will increase next year from $18,500 to $19,000:

  • 401(k)
  • 403(b)
  • Most 457 plans
  • Thrift Savings Plan

IRA Max Contribution in 2019

In addition, the base contribution limit for IRAs will increase for the first time since 2013, rising from $5,500 to $6,000.

The new limit for contributions to IRAs for those under age 50 with earned income from wages is increased to $6,000 from $5,500. This limit applies to any type of IRA in 2019.

Those 50 and older in 2019 can make an additional catch-up contribution of $1,000, for a total annual contribution of $7,000.

All of these limits apply to savers who are 49 or younger.

2019 Catch up contribution retirement accounts

The catch-up contribution limits for the following workplace retirement accounts will remain $6,000, meaning savers age 50 or older can stash a total of $25,000 in these types of accounts in 2019:

  • 401(k)
  • 403(b)
  • Most 457 plans
  • Thrift Savings Plan

The catch-up contribution limit for IRAs will remain $1,000. It is not subject to an annual cost-of-living adjustment (COLA), according to the IRS. This means savers age 50 or older can stash a total of $7,000 in IRAs next year.

IRS Cost Of Living Adjustment for 2019

Each year in October, the IRS announces the cost-of-living adjustments (COLAs) that will apply to retirement plan contribution limits and other thresholds for the following calendar year. Any change to the contribution limits requires adjustments in payroll systems and internal procedures designed to make sure plan contributions stay within the allowed limits.

Plan advisors, record keepers, and third party administrators (TPAs) are among the best resources to help plan sponsors understand how their plan may be affected by the annual COLA adjustments. Plan sponsors may want to

  • Review the COLAs each year with their internal payroll staff or outsourced payroll company to make sure all necessary adjustments are made and confirm the correct definition of compensation is being used for plan operations.
  • Analyze last year’s nondiscrimination testing results to determine whether changes to the groups of employees classified as HCEs or key employees could affect this year’s tests. A plan advisor can help explore plan design changes (e.g., safe harbor 401(k) plans) to prevent failed testing in the future.


 Traditional IRA and ROTH IRA in 2019: Some income limits to increase

Income limits determine who is eligible to make tax-deductible contributions to certain types of tax-sheltered accounts.

According to the IRS, the income ranges for determining eligibility to make deductible contributions to the following accounts will increase in 2019:

  • Traditional IRAs
  • Roth IRAs

The income range for claiming the saver’s credit on your federal income taxes will also increase.

For more information, check out the IRS website.

Why contribution limits increase

Under federal law, the U.S. Department of the Treasury — which includes the IRS — must evaluate annually whether to make cost-of-living adjustments to retirement plan contribution limits. A rising cost of living typically results in higher contribution limits.

Finally, be aware that new proposed regulations recently issued by the IRS make it easier for many small employers to offer retirement plans to employees. The new regs authorize employers to join together in a single common retirement plan based on a geographic restriction, such as a city or county.

Not only will this provide another option for employers, it will likely save administrative costs for those employers that choose to participate.

Questions? Need help with your retirement account?

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