Now You Can Save More for Retirement

Good news for retirement savers: Starting in 2019, the  IRS just raised the annual contribution for IRAs, the first increase since 2013. Those who participate in 401(k), 403(b), most 457 plans and the Thrift Savings Plan for federal workers can now put aside more, too. It's also become easier to qualify for a Roth IRA, to have your contributions to a traditional IRA be tax-deductible and to claim the Saver's Credit.

Here's a summary of the new contribution and limitation levels.

The annual contributions limit for  traditional IRAs and Roth IRAs rose $500.

What you can contribute for 2019:  $6,000. 

What you could contribute for 2018: $5,500 

Annual contributions to your 401(k), 403(b), most 457 plans, Thrift Savings Plan also went up $500.

What you can contribute for 2019:  $19,000

What you could contribute for 2018:  $18,500.

Generally, contributions to a traditional IRA are tax-deductible in the year that you make the contribution. However, if you or your spouse (if you file taxes as married filing jointly) are covered by a retirement plan at work, your contributions may not be deductible, depending on your income.

Today's good news: The amount you can earn and still deduct these contributions has gone up for 2019. Here are the new phase-out ranges, from the IRS announcement of these changes:

• "For single taxpayers covered by a workplace retirement plan, the phase-out range is $64,000 to $74,000, up from $63,000 to $73,000.
• "For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $103,000 to $123,000, up from $101,000 to $121,000.
• "For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $193,000 and $203,000, up from $189,000 and $199,000.
• "For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000."

There are many benefits to saving your money in a Roth IRA, instead of a traditional one – especially that your distributions at retirement are completely tax free and that there are no required minimum distributions. However, there are income limitations in who qualifies to have a Roth. These have also been significantly loosened for 2019. Here's how the IRS describes it:

"The income phase-out range for taxpayers making contributions to a Roth IRA is $122,000 to $137,000 for singles and heads of household, up from $120,000 to $135,000. For married couples filing jointly, the income phase-out range is $193,000 to $203,000, up from $189,000 to $199,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000."

The Saver’s Tax Credit (also known as the Retirement Savings Contributions Credit) allows low- and moderate-income workers to take a tax credit of up to $1,000 for contributions to a traditional or Roth IRA, or to an employer-sponsored 4 01(k), 403(b), SIMPLE, SEP or governmental 457 plan.

Here's how it's changed, according to the IRS: "The 2019  income limit for taking this credit rose to  $64,000 for married couples filing jointly, up from $63,000; $48,000 for heads of household, up from $47,250; and $32,000 for singles and married individuals filing separately, up from $31,500".

If you are covered by compensation limits or elective deferrals; are a key employee or may be defined as a highly compensated employee; have an employee stock ownership plan, a SEP or SIMPLE IRA plan or any other retirement provisions covered by the IRS Code, the provisions that cover you may also have changed. These determinations are delineated in IRS Notice 2018-83. Consult your tax advisor for further details.

If you are age 50 or over, you can increase your contributions to help you save as retirement gets nearer. The extra amounts you can put aside for retirement did not change for 2019.

Catch-up contributions are still:

• $1,000 more per year for a traditional or Roth IRA (for 2019, that will make the contribution $7,000, instead of $6,500) 
• $6,000 more for a 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan. (raising these contributions to an annual maximum of $25,000 per year, instead of $24,500).

These changes should help taxpayers to save even more for retirement in 2019. The 2018 limits will prevail for the taxes that you file by April 15, 2019. Remember that you can contribute to your 2018 traditional or Roth IRA as late as the April 2019 tax deadline.