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Retirement Plans Increased 2019 Contribution Limits

 Retirement Plans Increased 2019 Contribution Limits

401K Changes
On November 1, 2018 the Internal Revenue Service increased the 2019 retirement plan contribution limits for employees. Effective January 1, 2019, retirement plan contribution limitation has increased from $18,500 to $19,000 for employees under the age of 50.  For employees age 50 or over the retirement plan contribution limitation has increased to $25,000.  The catch-up contribution of $6,000 remains unchanged for 2019.

Individual Retirement Account Changes
Traditional Individual Retirement Accounts rules have changed effective November 1, 2018. The first change allows for an individual to make contributions to a Traditional Individual Retirement Account up to $6,000 (subject to certain limitations based on earned income, employer retirement plan eligibility, and filing status). In 2018 the traditional IRA contributions were limited to $5,500. The increase in the IRA contribution limit is the first increase since 2013.  The traditional IRA catch-up contributions of $1,000 remain unchanged for a taxpayer age 50 or over.

The second change related to IRA contributions relates to the amount of money a taxpayer can make and still be eligible to make contributions. If a taxpayer or spouse is eligible to make employer sponsored retirement plan contributions, then any traditional IRA contributions are limited based on income limitations.   

  • An individual who is single or head of household may be eligible to put aside contributions in an  IRA if their modified adjusted gross income is $64,000 or less. A partial deduction may still be taken if the income is over $64,000, but less than $74,000. The income limitation for 2018 was limited to income over $63,000, but less than $73,000.
  • A married taxpayer who is not covered by an employer sponsored retirement plan with a spouse who has an employer sponsored retirement plan can set aside contributions in an IRA if the married couple’s income is not more than $193,000. The limit is up from the 2018 limit of $189,000. A partial deduction can still be taken as long as their modified adjusted gross income does not exceed $203,000 (for tax year 2018 the limit was $199,000).
  • A married taxpayer who is covered by an employer sponsored retirement plan can set aside additional amounts in an IRA account if the married couple’s income does not exceed $103,000 compared to 2018 limit of $101,000. A partial deduction can still be taken as long as the taxpayer modified adjusted gross income does not exceed $123,000 (increased from $121,000 in tax year 2018).

The Internal Revenue Service has provided Taxpayer’s with additional tax savings opportunities and along with higher eligibility income limitations for 2019. Taxpayer’s should consider increasing their fund contributions to reduce their tax liability, as well as increase their savings for retirement, keep up with future cost of living expenses, and reduce the number of years required to save before retirement.  

For more information, please contact your Herbein advisor. Article written by Christopher Dingman, CPA. For additional information contact the author at info@marketing.com