Good news for retirees: The Internal Revenue Service announced cost-of-living increases to contribution limits for pension plans in 2019.
The 401 (k) s annual contribution limits will increase to $ 19,000 from $ 18,500.
And the annual contribution to an IRA, last increased in 2013, rises to $ 6,000 from $ 5,500.
“This is another win for investors and savers,” says Stephanie Bacak, financial planner at Capstone Global Advisors. “For so long there have not really been any increases in the cost of living in the IRA, so it’s a great opportunity for so many to be better prepared for retirement.”
Recovery contributions, available to individuals aged 50 and over, will remain unchanged at $ 6,000 for 401 (k) s and $ 1,000 for IRA.
In addition to 401 (k) s, the limits for 403 (b) s, most 457 plans and the federal government’s second-hand savings plan will increase to $ 19,000.
Also on the rise next year are the income brackets that determine eligibility for deductible contributions to IRAs, Roth IRAs and to claim the saver’s credit.
For example, the income phase-out interval for taxpayers who make contributions to a Roth IRA has increased from $ 122,000 to $ 137,000 for singles and heads of households, from $ 120,000 to $ 135,000. For married couples filing a joint declaration, the income phase-out range is $ 193,000 to $ 203,000, $ 189,000 to $ 199,000.
The IRS hikes are beneficial, says Shane Mason, a certified financial planner at Brooklyn FI, but only if you are able to make the most of your contribution.
He says those who want to continue maximizing their 401 (k) should review their contributions to make sure they’re putting up enough with each paycheck.
Those who are paid semi-annually (twice a month or 24 times a year) should contribute $ 792 per paycheck, and those paid biweekly (every two weeks or 26 times a year) should contribute $ 731 per paycheck.
CNN Money (New York) First published November 1, 2018: 4:50 pm ET