2019 IRS Contribution Limits

The IRS has announced they are increasing the contribution limits for employee retirement plans such as 401(k)s to $19,000 a year, which is a $500 that increase. For individuals age 50 and older, you are allowed to contribute an extra $6,000 for a total of $25,000. That feature remains unchanged from previous years.

Limits on personal, non-workplace retirement accounts are also moving up. Individual Retirement Accounts, also known as IRAs, will also see a $500 a year increase from $5,500 to $6,000. Again, for those people 50 or older, you’re allowed to contribute an additional $1,000. There are certain income limitations you must meet to qualify which will be explained later on.

While $500 doesn’t sound like a big increase, it can make a difference. Investing $500 every single year for 30 years with a 7% average annual rate of return would grow to $47,230 in extra retirement savings.

The increase comes at a time when wages grew at its fastest rate since 2009 and unemployment is at a near 50-year low, according to figures from the department of labor. And while the overall economy may be performing well, the retirement saver sees uncertainty in their future.

According to a 2018 report published by the Transamerica Center for Retirement Studies, 52% of adults cited outliving my savings or investments as the number one fear in retirement. The outlook isn’t better. The vast majority, 79%, believe their generation will have a much harder time achieving financial security compared to their parent’s generation.

The bottom line…take advantage of as much “tax friendly” savings accounts as possible. Start with maxing out your workplace benefits. Once you reach that limit, see if you qualify to contribute to a Traditional IRA or Roth IRA. Speak to your Oppenheimer financial advisor or tax advisor for more information.