IRS Makes Retirement Account Inflation Adjustments

The important details are as follows:

• 401(k): In 2019 taxpayers will be able to pay up to $19,000 before taxes – up $500 on the current contribution limit.
• Traditional IRAs: In 2019 taxpayers will be able to contribute up to $6,000 – also up $500 on the previous limit.
• Catch up contributions: These limits will remain the same – $1,000 for Traditional and ROTH IRAs and $6,000 for 401(k) contribution plans.
• Solo 401(k) or SEP IRAs: In 2019 savers will be able to contribute $56,000 – up $1,000 on the previous limit.

However, it is important to remember that the IRS is yet to confirm details on potential changes to estate tax exemptions, federal income-tax brackets and the standard deduction; so, it is conceivable that further good news may be on the horizon.

Overall, these small shifts represent a positive development for retirement savers in the US as they are likely to mean, in the short term, lower tax bills and, in the long term, increased retirement income.

This is particularly true for those who are able to benefit from multiple plans. For example, if you add IRA or ROTH IRA to 401(k) contributions and take your full catch-up contribution entitlement, in 2019 you could make $32,000 in allowable savings – certainly not a sum to be sniffed at.

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