Good news for retirement savers: The Internal Revenue Service announced a cost-of-living increase to the contribution limit for retirement-related plans in 2019.
The annual contribution limit for 401(k)s will increase to $19,000 from $18,500.
And the annual contribution to the IRA, last increased in 2013, increased to $6,000 from $5,500.
“This is another win for investors and savers,” said Stephanie Bacak, a financial planner at Capstone Global Advisors. “For a long time, IRAs really haven’t increased the cost of living so this is a great opportunity for many people to better prepare for retirement.”
The updated contributions, for those 50 and older, will remain unchanged at $6,000 for 401(k)s and $1,000 for IRAs.
In addition to 401(k)s, the limit for 403(b)s, most 457 plans and the federal government’s Thrift Savings Plan will also increase to $19,000.
Next year will also increase to the income ranges that determine eligibility for deductions for contributions to IRAs, to Roth IRAs, and to claim savers’ credits.
For example, the income exclusion range for taxpayers contributing to a Roth IRA increased to $122,000 to $137,000 for singles and head of household, up from $120,000 to $135,000. For married couples filing jointly, the income exclusion range is $193,000 to $203,000, up from $189,000 to $199,000.
Shane Mason, a certified financial planner at Brooklyn FI, says raising the IRS is helpful, but only if you can contribute the maximum.
He says people who want to continue to hit their 401(k) maximum should review their contributions to make sure they’re making enough of each paycheck.
Those who are paid semi-monthly (twice a month or 24 times a year) will contribute $792 per pay and those who are paid biweekly (biweekly or 26 times a year) must pay contribute $731 for each paycheck.
CNNMoney (New York) First published November 1, 2018: 4:50 PM ET