Good news for retirement savers: The IRS announced an increase in the cost of living for contribution limits for retirement-related plans in 2019.
The annual contribution limit for 401(k)s will increase from $18,500 to $19,000.
The annual contribution to the IRA (last increased in 2013) increased from $5,500 to $6,000.
“This is another win for investors and savers,” said Stephanie Bacak, financial planner at Capstone Global Advisors. “The cost of living in the IRA hasn’t really increased for so long, so for so many people, it’s a great opportunity to be more prepared for retirement.”
For those 50 and older, the catch-up contributions will remain the same, at $6,000 for 401(k)s and $1,000 for IRAs.
In addition to 401(k)s, the limit for 403(b)s, most 457 plans, and the federal government’s Thrift Savings Plan will also increase to $19,000.
The range of income that will rise next year determines deductible contributions to IRAs, Roth IRAs, and eligibility for savers credit.
For example, the income phase-out range for taxpayers contributing to a Roth IRA has increased from $120,000 to $135,000 to $122,000 to $137,000 for singles and heads of household. For married couples filing jointly, the income phase-out range is $193,000 to $203,000, increasing from $189,000 to $199,000.
An increase in the IRS is helpful, but only if you can make the greatest contribution, says Shane Mason, a certified financial planner with Brooklyn Financial Institutions.
Those who want to continue maximizing their 401(k) should revisit their contributions to make sure they’re investing enough in every paycheck, he said.
Those paying semi-monthly (twice a month or 24 times a year) should pay $792 per paycheck, while those paying biweekly (two weeks or 26 times a year) should pay $731 per paycheck.
CNNMoney (New York) First published November 1, 2018: 4:50pm ET