At the end of 2018, the Internal Revenue Service (IRS) announced inflation-adjusted figures for retirement account savings for 2019, and many changes that will help savers. The technical guidance on the numbers can be found in IRS Notice 2018-83.
After six years at $5,500, the amount you can contribute to an Individual Retirement Account (IRA) is being bumped up to $6,000. The amount you can contribute to your 401(k) or similar workplace retirement plan, such as a 403(b), 457, and federal Thrift Savings Plan, increases from $18,500 in 2018 to $19,000 in 2019. Catch-up contribution limits if you’re 50 or older in 2019 remain unchanged at $6,000 for workplace plans and $1,000 for IRAs. You can make the catch-up contribution even if you do not turn 50 until December 31, 2019.
The amount that self-employed and small business owners can save in a SEP IRA or a solo 401(k) rises from $55,000 in 2018 to $56,000 in 2019. That’s based on the amount they can contribute as an employer, as a percentage of their salary. The compensation limit used in the savings calculation also goes up from $275,000 in 2018 to $280,00 in 2019.
The limit on SIMPLE retirement accounts increases from $12,500 in 2018 to $13,000 in 2019. The SIMPLE catch-up limit is still $3,000.
You can earn a little more in 2019 and then deduct your contributions to a traditional pretax IRA. Even if you earn too much to take a deduction for contributing to an IRA, you can still contribute; it’s just not deductible. For single taxpayers covered by a workplace retirement plan, the phase-out range is now $64,000 to $74,000. For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is now $103,000 to $123,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $193,000 and $203,000.
The inflation adjustment helps Roth IRA savers too. In 2019, the Adjusted Gross Income (AGI) phase-out range for taxpayers making contributions to a Roth IRA is $193,000 to $203,000 for married couples filing jointly. For singles and heads of household, the income phase-out range is $122,000 to $137,000.
Keep in mind that the changes are affecting limits for 2019 and not your current tax filing for 2018. On a separate note, if you are an SEI client that will be requesting a Turbo Tax filing for your 2018, please do so by April 1, 2019.
Lisa A. Dugan