In 2019, those saving for their retirement will be given the option to contribute $500 more to their 401(k) s and individual retirement plans. For those who are working and have a slightly higher income may also be able to contribute to Roth IRA’s and claim the retirement savers tax credit.
Below are a few of the changes to retirement accounts that savers will need to be aware of in 2019:
Revision to the 401(k) contributions limit:
In a revision to the contribution limit for 401(k) s, most 457 plans and the Thrift Savings Plan, individuals will now be able to put $19,000 in, instead of the previous amount of $18,500 last year.
Resulting from this change, workers can choose to defer paying income tax on roughly $42 more a month, and older workers can now contribute a maximum of $25,000 to their 401(k) plans this year.
New contribution limits for IRA’s:
In 2019, the IRA contribution limit has increased to $6,000, the first increase to happen since way back in 2013. As a result of this, a more comfortable retirement planning is on the cards for those who choose to make the most of the increase; however, for those aged 50 and above, the IRA catch up contribution limit remains at $1,000 and does not account for any changes to the cost of living.
Income cut-offs for IRA’s:
For those employees who do not have access to a 401(k) or other such type of retirement account through their employer, are now able to contribute to a tax-deductible IRA irrespective of how much money they earn through their job. However, for employees who may be deemed to earn too much and are eligible for a 401(k), they may be disallowed from trying to claim an additional tax deduction on an IRA contribution.
Income limits on Roth IRA’s:
After tax Roth IRA contributions enable individuals to qualify for tax-free investment growth and tax-free investment growth, along with tax-free withdrawals in retirement. In 2019, workers can earn $2,000 more than the previous year and remain eligible to contribute to a Roth IRA. For those workers who are earning more than $122,000 individually and $193,000 as a married couple, the ability to make Roth IRA contributions has been phased out. Earning more than $137,000 as an individual or $203,000 as a married couple, no longer enables contributions to a Roth IRA this year.
Credit income limits for savers:
Qualifying for the savers credit has been made a little easier this year, with those on low and moderate incomes saving for retirement, able to earn between $500 and $1000 more and still qualify for the savers credit. This credit is worth between 10 ads 50% of 401(k) and IRA contributions up to $2,000 for individuals and $4,000 for couples. Increased to $32,000 for individuals, $48,000 for heads of households and $64,000 for married couples, is the new income limit for savers credits. Those saving for retirement and on the lowest incomes, are now eligible for the largest tax credit which may be worth up to $1,000 for individuals and $2,000 for couples. In addition to the tax deduction for traditional retirement accounts, the savers credit can be claimed, too.
For more detailed advice and guidance about saving for retirement in 2019, you are
Strongly advised to seek help from a professional tax and payroll service provider.