2019 Brings Changes to Retirement Planning

Retirement planning can sometimes feel confusing, but you know one thing for sure: No one has ever claimed that they saved too much for retirement! The mantra, “save all you can”, still holds true. Now, we have a bit of good news: In 2019, the contribution limit for qualified retirement plans will increase, making it possible to save more for your retirement while enjoying certain tax benefits.

Contribution limits for qualified retirement plans (401k, 403b, Thrift Savings Plans, and most 457 plans) will increase by 500 dollars, to $19,000 next year. In January, increase your regular contributions just a bit so that you reach the max by the end of 2019.

That might not seem like an enormous difference, but remember that contribution limits tend to grow by small intervals each year, or every few years. Increase your contributions accordingly, and over time this will help you keep pace with a sound retirement planning strategy.

The catch-up contribution limit remains the same, at $6,000 annually. If you’re age 50 or over, you can stash an additional $6,000 in your qualified retirement plan next year, for a total annual contribution of $25,000. This is a smart strategy for everyone, but particularly those who got a late start on their retirement plans.

As for the tax benefits, remember that contributions to a qualified retirement plan are made on a pre-tax basis if you have chosen the traditional contribution structure. This lowers your overall taxable income for the year, and you won’t owe income taxes on your contributions until you begin taking distributions from the account in retirement. At that time, the money you withdraw is taxed as regular income, according to the income bracket into which you fall.

As for Individual Retirement Accounts (IRAs), the contribution limit increases to $6,000 annually (and and extra $1,000 for the catch-up contribution). Keep in mind that some people do choose to fund both types of accounts.

If you have any questions about retirement planning, do give us a call. We should continue to meet regularly in the years leading up to retirement, and afterward to keep an eye on your retirement income strategy.