Good news for retirement savers: You can sock away more money in multiple types of tax-sheltered retirement plans next year.
The IRS announced Thursday 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
In addition, the base contribution limit for IRAs will increase for the first time since 2013, rising from $5,500 to $6,000.
All of these limits apply to savers who are 49 or younger.
Today’s news follows a similar announcement about rising limits for health savings accounts (HSAs), as we detailed in “Contribution Limits for This Tax-Free Account to Rise Again.”
Catch-up contributions remain unchanged
Folks who are 50 or older can save more money in retirement accounts by also making so-called catch-up contributions. The limits for these contributions will not increase next year, however.
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.
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.
To learn about the COLA that will affect your Social Security retirement benefits, check out “2019 Social Security Bump Is Biggest in 7 Years for Retirees.”
How do you feel about the retirement plan contribution limits for 2019? Sound off below or over on our Facebook page.
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