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.
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.
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.