The IRS recently announced that next year you can save more in different types of tax-advantaged retirement plans. Find out six ways the new tax rules affect your retirement.
While you may not like to hear that the cost of living in the U.S. continues to go up every year, there’s an upside for your retirement savings. Every fall, the Internal Revenue Service (IRS) evaluates whether to increase retirement plan contributions and benefits to keep up with those cost-of-living increases.
The IRS recently announced that next year you can save more in different types of tax-advantaged retirement plans. In this post, I’ll review six ways the new tax rules affect your retirement in 2019 so you can build a bigger nest egg.
6 Ways New Tax Rules Affect Your Retirement in 2019
- You can contribute more to a workplace retirement plan.
- Your employer can contribute more retirement matching funds.
- You can contribute more to an individual retirement plan.
- You’re eligible for more tax deductions with higher income.
- You’re eligible for a Roth IRA with higher income.
- You can contribute more to a retirement plan if you’re self-employed.
Here’s the detail on each updated retirement benefit that you should take advantage of starting next year.
1. You can contribute more to a workplace retirement plan.
Using a retirement plan offered by an employer is the most popular way Americans save for retirement. Depending on where you work, you might have the option to participate in a 401(k), a 403(b), a 457, or a thrift savings plan (TSP).
As an employee, your base contribution limit will increase $500, from $18,500 to $19,000. And if you’ve reached age 50, you can save more by taking advantage of “catch-up” contributions.
The catch-up limits haven’t changed and remain $6,000. In other words, if you’re age 50 or older you can save up to $25,000 per year in most types of employer-sponsored retirement plans.
2. Your employer can contribute more retirement matching funds.
If your employer offers a retirement plan and additional matching funds, you’d be nuts not to max out that benefit! It’s free money for any worker who participates.
However, depending on the details of your retirement plan, matching funds may come with a vesting schedule. While your contributions are always fully vested, leaving the company early means you could forfeit some amount of matching funds in your retirement account.
Starting in 2019, the total amount that you and your employer can contribute to a workplace retirement account increases by $1,000 from $55,000 to $56,000 per year.