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401(k) Contribution Limits Will Go Up In 2019

December 11, 2018

401(k) Contribution Limits Will Go Up In 2019

Key Takeaways

In today’s blog post and video, we’re talking about the 401k & IRA contribution limits that are increasing in 2019!

  • 401(k) contribution limit increases to $19,000 (<age 50) & $25,000 (age 50+)
  • Annual additions limit increases to 56,000 in 2019.
    • Note: Annual additions limit = 401k paycheck contribution + match + profit sharing
  • IRA contribution limit increases to $6,000 (< age 50) & $7,000 (age 50+). The first increase since 2013!
  • SIMPLE IRA contribution max increases to $13,000

Click here to watch the full video or read the full video transcript, below.


Transcript

Would you save more for retirement in 2018 if you could? Well, the good news is, you can. My name is Ashley Micciche. I’m the CEO of True North Retirement Advisors, where we specialize in retirement and exit planning for business owners. If you’re a business owner within 10 years of retirement, there is a short window of time for you to be able to exit your business successfully and pivot into the next stage of your life with all the financial security you need. We are here to guide you on your path to retirement.

401(k) Contribution Limit Increases to $25,000

In 2019, the 401(k) contribution limit goes up to $25,000 if you’re over 50. It’s $19,000 if you’re under 50. But today, since most of our audience are people in those last 10 years or so before retirement, I’m going to focus on the changes that apply to those of you who are over 50 years old. If you’re under 50, look up the numbers, but they’ve gone up for you as well.

In 2019, if you participate in a 401(k) plan, you will be able to contribute $25,000 in 2019 to your 401(k). That’s just your contribution from your paycheck. That doesn’t include any matching contributions or any profit-sharing contributions that you would receive from the company as well.

Annual Additions Limit Increases to $56,000 in 2019

Another thing that’s gone up for next year, also applicable to the 401(k), and that’s what’s called the annual additions limit. What this is, is the dollar amount when you combine your contributions, your 401(k) paycheck contributions, matching dollars, and profit-sharing contributions. That limit has gone up to $56,000 for 2019.

If you’re a small business owner and you have a 401(k) plan and a profit-sharing plan, and you also do a match, you have more flexibility now. You can contribute more next year to the plan. When you combine the $25,000 from your paycheck contributions, if you’re over 50, your matching contributions, and profit-sharing contributions, you can put up to $56,000 in the 401(k) plan in 2019. It’s a beautiful thing.

IRA Contribution Limit Increases for the first time since 2013!

Okay, the other thing I want to bring up is that there’s lot of amounts that are changing for next year as well. Basically, what the IRS does is every few years, they say, “Oh, okay, well inflation has gone up. Cost of living adjustments, we’re going to increase, bump this up a little bit.” It’s been stagnant for the last couple of years, but also what’s going up in 2019 are IRA contributions. If you do not have access to a 401(k) plan, you don’t maintain one in your business, you can increase what you’re contributing to IRA and Roth IRA accounts. Or, if you have a simple IRA, that limit has gone up as well. In an IRA, whether it’s a traditional or a Roth IRA, 2019 you will be able to contribute $7,000 if you’re over age 50.

Simple IRA Contribution Limit Increases to $13,000

Also, if you have a simple IRA, let’s say you don’t have a traditional IRA, a Roth IRA, or a 401(k), but you have a simple IRA, which is a very common plan for small businesses, that limit has gone up as well. Next year, in 2019, you can put up to $13,000 in your simple IRA.

Bottom Line

The bottom line here is that pretty much across the board, contribution limits have gone up. Yes. Yay. They’ve gone up for next year. Take advantage of that. If you are participating in the 401(k), look at your payroll contributions. If you were maxing out last year, you’ll need to bump those up to make sure that you max out in 2019 as well. If you’re a business owner and you’re trying to maximize what you can put into a simple IRA or get up to that $56,000 annual additions limit in your 401(k) and profit-sharing plan, take note of that as well.

THANKS FOR READING!

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Disclosure: 

The views outlined in this newsletter are those of True North Retirement Advisors (TNRA) and should not be construed as individualized or personalized investment advice. Any economic and/or performance information cited is historical and not indicative of future results. Economic forecasts set forth may not develop as predicted.

Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for a given client or portfolio.

Investing in stocks includes numerous specific risks including the fluctuation of dividend, loss of entire principal and potential illiquidity of the investment in a declining market. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond and bond mutual fund values and yields will decline as interest rates rise and bonds are subject to availability and change in price.

Any questions regarding the applicability of any specific issue discussed above should be addressed with TNRA. All information, including that used to compile charts and/or tables, is obtained from sources believed to be reliable, but TNRA has not verified its accuracy and does not guarantee its reliability.

Moreover, you should not assume that any discussion or information contained in the newsletter serves as the receipt of, or as a substitute for, personalized investment advice from TNRA or from any other investment professional. To the extent that you have any questions regarding the applicability of any specific issue discussed above to your individual situation, you are encouraged to consult with TNRA or the professional advisor of your choosing. All information, including that used to compile charts, is obtained from sources believed to be reliable, but TNRA has not verified its accuracy and does not guarantee its reliability.

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Planning for your retirement as a business owner can be complex - saving enough, minimizing taxes, and planning your exit. Let us handle the details of your retirement so you can focus on what you do best: running your business.