IRA Contribution Limits and Roth IRA for 2019

IRA Contribution Limits and Roth IRA for 2019

 

ira contribution limitsHappy 2019! A friendly reminder that your IRA and Roth IRA contribution limits have changed for 2019. Most of them are up from 2018. The contribution limits for retirement accounts are as follows:

401(k), 403(b), 457 and TSP Plan Contribution Limits

The 401(k), 403(b), 457, and Thrift Savings Plan (TSP) limit will go up to $19,000. This is up $500 from 2018. If you’re 50 or older, the additional catch-up contribution limit is $6,000, for a total of $25,000.

Traditional IRA and Roth IRA Contribution Limits

The IRA and Roth IRA contribution limits for 2019 is $6,000. This is up $500 from 2018. If you’re 50 or older, the additional catch-up contribution is $1,000, for a total of $7,000.

SIMPLE 401(k) and SIMPLE IRA Limits

The SIMPLE 401(k) and SIMPLE IRA limit for 2019 is $13,000. This is up $500 from 2018. If you’re 50 or older, the additional catch-up limit is $3,000 for a total of $16,000.

SEP IRA and Solo 401(k) Contribution Limits

If you’re self-employed, both SEP IRA and Solo 401(k) limits go up to $56,000 in 2019. This is up $1,000 from 2019. There is no catch-up limit for this type of account. This is probably the largest ceiling out of any of the accounts and far exceeds the IRA contribution limits.

Flexible Spending Account (FSA)

The FSA contribution limits for 2019 is $2,700. A major whopping increase of $50 from 2018! There are no catch-up contribution limits for this account. This is my least favorite account. Money in FSAs don’t carry over to the next year so it’s a spend-it-or-lose-it deal. Additionally it has the lowest value of $2,700 which is far worse than the IRA contribution limits.

Health Savings Account (HSA)

The HSA limit will go up to $3,500 in 2019. This is a $50 increase from 2018. This is my favorite type of account. Tax-free distributions if used for medical purposes and we all know how expensive the American health system is. Unfortunately you need a high-deductible health care policy to open an HSA. If you have family coverage, the limit becomes $7,000. The HSA is my favorite account. Even though $3,500 is much lower than the IRA contribution limits, the distributions are tax-free for qualified purchases related to health care.

2019 Summary

Account Type 2018 2019 Change
401(k), 403(b), 457, and TSP $18,500 $19,000 $500
Traditional IRA and Roth IRA Contribution Limits $5,500 $6,000 $500
SIMPLE 401(k) and SIMPLE IRA $12,500 $13,000 $500
SEP IRA and Solo 401(k) $55,000 $56,000 $1,000
Flexible Spending Account $2,650 $2,700 $50
Health Savings Account $3,450 $3,500 $50
If you’re 50 or older:
401(k), 403(b), 457, and TSP $24,500 $25,000 $500
Traditional IRA and Roth IRA Contribution Limits $6,500 $7,000 $500
SIMPLE 401(k) and SIMPLE IRA $15,500 $16,000 $500
SEP IRA and Solo 401(k) $55,000 $56,000 $1,000
Flexible Spending Account $2,650 $2,700 $50
Health Savings Account $3,450 $3,500 $50

Remember that you have until Tax Day which is April 15, 2019 to maximum all your IRA contribution limits for 2018. In other words, if you haven’t caught up yet, you may want to max out your 2018 accounts before starting on your 2019 accounts. Since you will have until 2020 to finish all your IRA contribution limits for 2019.

Bonus:

Once the New Year hits, I’m gonna transfer $6,000 into my Roth IRA. Once that happens, my savings account will need to be rebuilt back up to its full amount. I like to keep just enough in my savings account so that by the end of next year, on December 31st, all the compound interest in my savings account will equate to $6,000. This way, I can start the New Year and immediately deposit another $6,000 and max out my IRA contribution limits.

Therefore, how much will I need in my savings account on January 1st so that I’ll have $6,000 on December 31st? Using Ally’s Only Savings Calculator, I found that if you have $5,883 in your savings account, then you’ll have approximately $6,000 at the end of the year. In other words, if you leave $5,883 in your savings account all year, then you’ll be ready to deposit your full contribution into your IRA come 2020. This is assuming the IRA contribution limits don’t change the following year.

 

Ally Compound Interest Calculator

But what about us normal human beings who don’t have $5,883 laying around all year? How much would you have to stash away each month in order to have $6,000 by the end of the year so you can deposit it into your IRA next year?

This time I used a compound interest calculator on www.investor.gov to figure this out. Assuming Ally’s 2.0% interest savings account:

 

Compound Interest Calculator

I found that you’d have to deposit $495.03 per month, into a 2% savings account assuming daily compounding. This will get you your $6,000 by the end of the year. Of course this also assumes that there’s no changes to the IRA contribution limits.

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