Journalists have been calling 2019 the “year of retirement reform” for a couple of reasons. Congress is currently considering several significant retirement bills. If these bills pass, they may have a positive impact on retirement savings. There are significant changes that have already taken effect in 2019. We’re going to give you a rundown on what has already happened and what may be coming soon.
Contribution limits have increased for 2019
Contribution limits for almost all types of retirement accounts have increased in 2019. This allows an individual to save money for retirement while reducing taxable income. The chart below shows the changes from 2018 to 2019. There is still plenty of time left in the year to adjust your contributions to take full advantage.
| Maximum workplace retirement plan contribution amounts | 2018 | 2019 |
| 401(k), 403(b), most 457 plans and federal Thrift Savings Plan | $18,500 | $19,000 |
| Catch-up contributions in these plans for people 50 and older | $6,000 | $6,000 |
| IRA contribution limits | 2018 | 2019 |
| Traditional and Roth IRAs for people younger than 50 | $5,500 | $6,000 |
| Catch-up IRA contributions for people 50 and older | $1,000 | $1,000 |
| Defined benefit pension plan annual benefit limits | $220,000 | $225,000 |
| Annual employer limit for 401(k)-type plans, SEP IRAs and solo 401(k)s | $55,000 | $56,000 |
| Annual contribution limit for SIMPLE plans | $12,500 | $13,000 |
| Catch-up contribution limit for people age 50 and up | $3,000 | $3,000 |
| Adjusted gross income phase-out range of IRA deductibility | 2018 | 2019 |
| Single and contributing to a workplace plan | $63,000 | $64,000 |
| to $73,000 | to $74,000 | |
| Married filing jointly when the spouse making the contribution has a workplace plan | $101,000 | $103,000 |
| to $121,000 | to $123,000 | |
| Married filing jointly when the contributor isn’t covered by a workplace plan but the spouse is covered | $189,000 | $193,000 |
| to $199,00 | to $203,000 | |
| Married and covered by a workplace place plan but filing separately | $0 to $10,000 | $0 to $10,000 |
| Roth IRA income eligibility phaseout | 2018 | 2019 |
| Single and head of household filers | $120,000 | $122,000 |
| to $135,000 | to $137,000 | |
| Married filing jointly or qualified widow/widowers | $189,000 | $193,000 |
| to $199,000 | to $203,000 | |
| Married filing separately | $0 | $0 |
| to $10,000 | to $10,000 | |
| Retirement savings contribution credit, or saver’s credit, income limits | 2018 | 2019 |
| Married filing jointly couples | $63,000 | $64,000 |
| Heads of household | $47,250 | $48,000 |
| Single taxpayers | $31,500 | $32,000 |
| * as provided by bankrate.com |
One significant piece of legislation
Of the various bills currently in Congress, one has passed the House and is currently awaiting a vote in the Senate. The Setting Every Community Up for Retirement Enhancement (SECURE) Act includes 29 changes to retirement savings. Forbes has a great explanation of the 8 changes most likely to impact you in some way. The goal of SECURE is to help small businesses have access to more affordable retirement plans for employees. If you work for an employer that provides a matching contribution, it’s important to take full advantage to maximize your retirement contributions. Doing so will help you prepare for retirement while reducing your current tax liability.
Figuring out how much to save for retirement
Saving for retirement is one of those efforts that happens in small, incremental pieces. Adding a little to your retirement account each month will pay off in the long run, even if your current contribution seems small. The younger you are, the more time you have to take advantage of compounding interest and see your savings grow. If you’re over 50, you can make catch-up contributions to help make up for lean years in your past.
As far as choosing an amount to contribute each month, that will vary from person to person. You may be able to put yourself into a lower tax bracket by increasing your contribution even a little. Vanguard’s retirement income calculator is a great tool that can help you meet your end goal. What will it take to maintain your standard of living when you stop working?
At GunnChamberlain, we emphasize that retirement saving should always be a top priority. You can’t borrow money to pay for retirement, so planning is essential. Please reach out to us to schedule a financial planning meeting with one of our professionals.