To help people save more for retirement, limits on the amounts they can contribute to many types of retirement plans have increased. This article looks at some common retirement plans and specifies how the limits have changed for each one. The article suggests that boosting contributions this year could both reduce this year’s tax bill and increase retirement savings.

Is saving more for retirements one of your goals for 2019? If so, you have some help. The limits on the amounts you can contribute to many types of retirement plans have increased.

401(k), 403(b) and most 457 plans

The annual salary deferral limit-that is, the amount you can contribute-to 401(k), 403(b) and 457 plans, along with the federal government’s Thrift Savings Plan, inched up from $18,500 in 2018 to $19,000 in 2019. If you’re 50 or older by December 31, you can add another $6,000 to this amount.

In 2019, the combined total of your contributions and your employer’s contributions to your plan can’t exceed $56,000 (or the amount of your compensation, if lower). This doesn’t include catch-up contributions if you’re 50 or older.

Traditional and Roth IRA limits

For 2019, you can stash a total of $6,000 in all your traditional and Roth IRAs. If you’re 50 or older, you can add another $1,000 to this amount.

But if you’re a single or head-of-household taxpayer and covered by a workplace retirement plan, for 2019 your deduction begins to phase out once your modified adjusted gross income (AGI) hits $64,000. It’s eliminated when modified AGI exceeds $74,000. If you’re a joint filer and covered by a workplace retirement plan, your deduction starts to drop once your modified AGI is $103,000 and is eliminated when it exceeds $123,000.

What happens if you’re not covered by a retirement plan, but your spouse is covered? If you file jointly, you also may be affected, because your IRA deduction begins to phase out when your modified AGI hits $193,000. It’s eliminated when modified AGI exceeds $203,000.

If your deduction is reduced or eliminated, you can make nondeductible traditional IRA contributions. The $6,000 contribution limit (plus $1,000 catch-up if applicable and reduced by an Roth IRA contributions) still applies. Nondeductible traditional IRA contributions may be beneficial if your MAGI is also too high for you to contribute (or fully contribute) to a Roth IRA.

If you’re a single or the head of a household, the amount you can contribute to a Roth IRA starts to drop once your modified AGI exceeds $137,000. For joint filers, these numbers are $193,000 and $203,000, respectively.

Be aware that married taxpayers filing separately are subject to much lower phaseout ranges for both traditional and Roth IRAs.

The more, the better

Generally, the more you contribute to tax-advantaged retirement plans, the better off you’ll be in retirement. Plus, you might reduce your current year’s tax. So consider boosting your contributions this year.

© 2019


James Schlehr, CPA, Senior Associate

James specializes in tax services for individuals and closely held business. He joined Hancock and Dana in 2015.  James holds a degree in Accounting, Finance, Banking and Investment Services. He is originally from Buffalo, NY and served in the U.S. Marine Corps from 2001 – 2008.