Bigger Retirement Plan Limits Increase Tax Savings Potential
The IRS recently announced that retirement savers will be able to save even more in 2019. This is great news for anyone that saves through individual retirement accounts like 401(k) plans, IRAs, and ROTH IRAs! The higher contribution limits also give savers a lower tax bill.
Contribution Limits for IRAs and ROTH IRAs
The contribution limit for Traditional and ROTH IRAs for 2019 will be $6,000. This will be an increase of $500 over the current limit, which has not changed since 2013. The contribution limit for anyone 50 years of age or older will be $7,000 after adding the catch-up contribution of $1,000.
Contribution Limits for 401(k) Plan
Anyone participating in a 401(k) plan through work will also see an increase in the contribution limit in 2019. Starting next year, taxpayers will be allowed to contribute up to $19,000 to a 401(k). The catch-up contribution for anyone 50 years or older is unchanged at $6,000. This means that anyone 50 years of age or older can contribute up to $25,000 in 2019 pre-tax. Maximizing these contributions can result in a substantial reduction in taxes!
Contribution Limits for Self-Employed
Small business owners and self-employed taxpayers will also see some increases in 2019. The SEP IRA limit will be increased to $56,000 in 2019.
Part of the Bigger Picture
Using retirement accounts as a way to save for the future while reducing taxes can be a great strategy for long-term success. Business owners and farmers looking to transition out of the operation should review a number of options available to them, including retirement accounts. While we do not offer investment services, we do frequently work with other advisers to find the best strategies for our clients. As estate planners, we also carefully consider how retirement accounts will pass upon death in the most tax-efficient way to achieve our clients' goals.
Interested in learning more about estate planning? Contact one of our attorneys today or call the office at (507) 288-5567.