Saving for retirement? Then we’ve got some good news.
The IRA contribution limit will increase to $6,000 in 2019, up from $5,500 in 2018. Even better news for some, if you’re over 50 in 2019 you’ll be able to contribute $7,000, as compared to $6,500 in 2018.
Why the Limit Increase?
The IRA contribution limit increase as a result of the IRS’s recently released COLAs (cost-of-living adjustments) to retirement account limits. It was 2013 the last time we saw the IRA contribution limit affected by COLAs. So, for the 5 years since 2013, limits were $5,500 for those under 50 and $6,500 for those over during each year. The Economic Growth and Tax Reconciliation Relief Act of 2001 (EGTRRA) originally put in place the COLAs and IRA contribution limits, prior to that back to 1982, the limit was $2,000.
Follow the Rules
Make sure you plan your IRA contributions for 2019 as not everyone is qualified to contribute the full $6,000 or $7,000 amount. Your IRA contributions must be based on earned income and not all taxable income counts such as investment and Social Security income. There are other restrictions to consider as well, such as if you are 70 ½ or older you aren’t able to make traditional IRA contributions. Or you might have too much income and are unable to contribute to a Roth IRA or have limits on your capability to deduct traditional IRA contributions.
Something to consider is if you have plans for making 2018’s contribution a prior year contribution in 2019, you will be limited to the $5,500 or $6,500 limit of 2018.
Additional Notable Limit Increases
Other retirement accounts the IRS has raised the limits on include 401(k) plans, income limit eligibility for Roth IRA contributions, and income limits for traditional IRA contribution deductibility for active participants. For 401(k)s in 2019, you can defer $19,000 of your salary to your 401(k) ($25,000 if you’re 50 or older). This is up $500 from 2018 where we were at a $18,500 limit or $24,500 if you’re 50 or older. The IRS has more information on retirement account limits for 2019 here.
If you have questions about your retirement savings plan or just want a second opinion to review your plan, don’t hesitate to give us a call at 913-393-1000 or schedule a complimentary consultation below.
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Investment advisory services offered through Barber Financial Group, Inc., an SEC Registered Investment Adviser.
The views expressed represent the opinion of Barber Financial Group an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Barber Financial Group does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.