You can contribute more to your 401 (k) and IRA by 2019

Workers will be able to contribute more to their retirement accounts in 2019.

The limit has been raised to $ 19,000, an increase of $ 500 from $ 18,500 in 2018 for 401 plans, as well as 403 plans, most of the 457 plans and the federal savings plan. announced Thursday the Internal Revenue Service. The catch-up contribution ceiling for employees aged 50 and over remains unchanged at $ 6,000, meaning that an employee aged 50 or over can invest up to $ 25,000 ($ 19,000 + $ 6,000) in his 401 (k) plan. These accounts also allow employer matches.

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Although $ 19,000 represents the portion of a deferred employee's pre-tax earnings, the overall limit on defined contribution plans (such as 401 (k) plans) has increased from $ 55,000 to $ 56,000 in 2019 This limit includes contributions from profit sharing contributions.

The IRS also increases the contribution ceiling for individual retirement accounts for the first time in six years, from $ 5,500 in 2018 to $ 6,000. The deductions for these contributions are subject to phasing-out intervals based on their income and access to a workplace retirement program:

• For 2019, single taxpayers covered by a occupational pension plan have a phasing-out range of between $ 64,000 and $ 74,000, which means that any amount under $ 64,000 is fully deductible and all exceeding $ 74,000 is not.

• For married couples who file together, when the spouse who contributes to the IRA is covered by a occupational pension plan, the phasing out period ranges from $ 103,000 to $ 123,000. For a contribution to the IRA that is not covered by a occupational pension plan but is married to a person who is, the deduction is phased out if the couple's income is between $ 193,000 and $ 203,000. .

• For a married individual who performs a distinct function and is covered by a occupational pension plan, the gradual withdrawal is between $ 0 and $ 10,000.

The Roth IRAs have separate income limits and no deductions:

• For 2019, single taxpayers or heads of households have a progressive income of between $ 122,000 and $ 137,000.

• For married couples who file together, the income elimination range is between $ 193,000 and $ 203,000.

• For an individual separate married statement, the range remains between $ 0 and $ 10,000.

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The savings credit income limit for low- and moderate-income workers has also been increased. For married couples who file together, the limit is now $ 64,000, compared to $ 63,000; for heads of household, it amounts to $ 48,000, as against $ 47,250; and for singles and married persons filing a separate return, it is $ 32,000, up $ 31,500.

Increasing the 401 (k) contribution limit is good for savers, but not many people benefit. About 10% of Vanguard participants made maximum use of their 401 (k) contributions in 2016 (when the limit was $ 18,000), according to an analysis by Boston College's Center for Retirement Research, down from 12% in 2013 when the ceiling was 17,500 USD. The report says that the number of workers who have reached the maximum of their 401 (k) plans could be even lower, the report said, considering that Vanguard has a "disproportionate number of large plans with higher incomes".

This news, while beneficial to many who wish to strengthen their retirement savings, does not apply to all – or even many – Americans. Not all workers have access to an employer-sponsored retirement account and, even then, they may not be able to save, perhaps because they did not know they should do so or simply, they can not afford to do it. According to the Bureau of Labor Statistics, about 54 million American workers invested money in a 401 (k) plan in 2015, while 150 million were employed that year.

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The amount a person must save for retirement depends largely on what he or she plans to do in retirement, such as where he or she wants to live, how to repay a mortgage, or how much his rent, what he will want to do during this time. free time. But it also depends on the biggest unknowns, including health and well-being, or possible emergencies. A 65-year-old American couple who retires in 2018 could expect to spend $ 280,000 on their health care expenses, including Medicare coverage and copayments, over-the-counter medications and vision care or dental care (but not long-term care).