Good news for retirement savers: The IRS announced that 2019 contribution limits for retirement-related plans will increase the cost of living.
The annual contribution limit for 401(k)s will increase from $18,500 to $19,000.
Annual IRA contributions were last increased in 2013, from $5,500 to $6,000.
“This is another win for investors and savers,” said Stephanie Bacak, a financial planner at Capstone Global Advisors. “For a long time, the cost of living in the IRA has actually not increased, so This is a great opportunity for many people to be better prepared for retirement.”
The catch-up contributions available for those 50 and older will remain unchanged at $6,000 for 401(k) accounts and $1,000 for IRAs.
In addition to 401(k) plans, limits will also increase to $19,000 for 403(b) plans, most 457 plans and the federal government’s Thrift Savings Plan.
Next year will also increase the income ranges that determine eligibility for deductible contributions to individual retirement accounts (IRAs), Roth IRAs and eligibility to apply for the saver’s credit.
For example, the income phaseout range increases from $120,000 to $135,000 for taxpayers who contribute to a Roth IRA, and from $122,000 to $137,000 for singles and heads of household. For married couples filing jointly, the income phaseout range is $193,000 to $203,000, up from $189,000 to $199,000.
Shane Mason, a certified financial planner at Brooklyn FI, said the IRS increase is helpful, but only if you can make the maximum contribution.
He said those who want to continue maxing out their 401(k)s should revisit their contributions to make sure they’re putting enough money into each paycheck.
Those who are paid semimonthly (twice a month or 24 times a year) should contribute $792 per paycheck, and those who are paid biweekly (every two weeks or 26 times a year) should contribute $731 per paycheck.
CNN Business (New York) First published November 1, 2018: 4:50pm ET