2019 Changes that Matter

Starting in 2019, the IRS just raised the annual contribution for IRAs, the first increase since 2013. 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.

New contribution and limitation levels:

You Got an IRA Raise

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

You Can Give More to Tax-Advantaged Employer Retirement Plans

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

Traditional IRA Contributions: You Can Earn More and Still Deduct

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 :

"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.

  1. "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.

  2. "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.

  3. "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."

More Taxpayers Qualify for a Roth IRA

There are many benefits to Investing your money through 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.

"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."

Retirement Savings Contribution Credit

The Saver’s Tax Credit (also known as the Retirement Savings Contributions Credit) allows lowand 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 401(k), 403(b), SIMPLE, SEP or governmental 457 plan.

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".

Other Changes to Qualified Retirement Plans

If you are covered by compensation limits or ; are a or may be defined as a ; have an , a or 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 . Consult your tax advisor or a qualified representative of Family Financial Strategies, Inc. for further details.

What Hasn't Changed: Catch-up Contributions

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. $1,000 more per year for a traditional or Roth IRA. (for 2019, that will make the contribution $7,000, instead of $6,500)

  2. $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 or save as a way of utilizing Tax-Free Vehicles for Investment Objectives. 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. So, an Investor wishing to contribute for the 2018 & 2019 contributions can do so at the same time beginning on January 1, 2019.

Additional Information:

A nation of 401(k) millionaires

Fidelity says the number of people with 401(k) accounts in their shop with balances over $1 million reached 187,400 at the end of September, up 42 percent from a year ago, and topping the previous record set earlier this year. However, I am sure that number has decreased tremendously since the dramatic decline of the Stock Market since September 2018. Those whom were quick to liquidate their stock positions and reposition the funds in New Asset Classes such as Real Estate or Debt Securities (Bonds & Promissory Notes) have been able to not only maintain the balances in their accounts but to grow them even higher.

Why it Matters: For most people, the 401(k) is one of a few ways they save and invest. If it weren’t for that voluntary deduction out of our bi-weekly paychecks, which sometimes comes with a match from your employer, even more than half the country would’ve missed out on the rise of the stock market over the past decade. Yes, the market has been shaky of late, but lengthen the time range on the chart, and it’s been a sweet climb up that has compounded annually. No promises that it will continue forever, but you can’t deny history. Be invested, somehow, somewhere..

What’s Next: Most Americans will see a tax cut and a better return when they file their 2018 income taxes. What will you do with yours?

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