We hope you are having a great start to 2019!
As the year kicks off, we want to remind you that the IRS has increased contribution limits for retirement plans in 2019. These increases are due to cost of living adjustments. We will gladly take them!
IRA Contributions: If you are working or have a non-working spouse and are not covered by a retirement plan you can now contribute $6000 as a base amount. If you reach age 50 during 2019 you may contribute a “catch up” amount of an additional $1000, making your total contribution $7000.
What is a “catch up” contribution? One way to view this term is to consider how challenging, perhaps, it was to invest and save money in your early working years. If you were raising a family, worked part-time, or were trying to get on your feet financially it may have been hard to put funds away for retirement. For those in their 20’s, 30’s, and 40’s the idea of “retirement” seems a long way off. When reaching our 50’s the reality sets in that perhaps we have not adequately prepared to replace our income – or to be UNEMPLOYED for 25-35 years (normal retirement time period).
There are some phase out thresholds due to income, but only if your wages exceed certain amounts. Should you have questions on these, just give us a call.
IRA contributions may be to a regular IRA or to a ROTH IRA. Roth’s have the same contribution limits, but the contributions are not tax deductible. Conversely, the withdrawals are not taxable either if you meet the criteria.
Employer Plans – Like your 401-k: The amount you can defer from your earnings is now $19,000 with a “catch up” contribution of an additional $6000. So, you may defer a total of $25,000 in 2019 if over age 50. Most employers let you adjust your 401-k contributions as often as you like, so this can be helpful to defer more funds if you are on the cusp of a tax bracket increase. Again, this evaluation is a service we provide.
Some employers offer a SIMPLE plan. Contribution limits increased to $13,000 for the employee with an additional $3000 “catch up” contribution. Note this is a higher “catch up” than other plans.
Retirement planning is an essential part of your financial plan. Be sure you are up to date on what amount of money you will need to replace your income once you stop working full time. We can help, planning is what we do!