Well it’s that time of year—I’m not talking about holiday shopping, gorging on Christmas cookies and caramel popcorn at work or doing damage control after embarrassing yourself at the office holiday party. I’m talking about making year-end contributions to your retirement plans.
Remember that any 2018 contributions to employer-sponsored plans like 401(k)s, 403(b)s and 457 plans must be made by Dec 31, 2018. You can make 2018 contributions to Traditional and Roth IRAs by April 15, 2019.
Here are some important highlights:
1. Annual contribution limits for most employer-sponsored plans have increased by $500
From $18,500 in 2018 to $19,000 for 2019 annual contributions limits for many employer sponsored retirement plans have creased by $500. Note that individuals age 50 and older may make an additional $6000 “catch-up” contribution.
2. Contributions to Traditional and Roth IRAs have also increased $500
Besides increasing the limits for employer sponsored plans, contributions to Traditional & Roth IRAs have also increased from $5,500 for 2018 to $6000 for 2019. Individuals age 50 and over can make an additional $1,000 catch-up contribution!
3. To receive a deduction for your IRA contribution, your income cannot exceed a certain amount each year (for 2018 and for 2019).
There are certain income thresholds that cannot be exceeded for you to receive a deduction for your IRA contribution, learn more about the 2018 IRS income thresholds here; and the IRS thresholds for 2019 are available here.
4. Keep an eye on the annual benefit compensation limits
The annual benefit for a participant with a defined benefit plan in 2019 cannot exceed the lesser of:
a) 100% of the participant’s average compensation for his or her highest 3 consecutive calendar years
b) $225,000 for 2019, up from $220,000 in 2018 (IRS)
5. For 2019, to qualify for a Health Savings Account (HSA ), you must have a health insurance plan with a minimum deductible
A qualifying HSA (Health Savings Account) needs to have a minimum deductible of at least $1,350 for a single person ($2,700 for a family). In 2019 you can contribute $3,500 to your HSA is you’re single or $7,000 for a family, up slightly from 2018!
6. Remember that HSAs may be available to individuals with high deductible health plans.
Don’t forget that Health Savings Accounts (HSAs) can be available to individuals on accounts that have high deductibles. It has some advantages because you make pre-tax contributions, enjoy tax-deferred growth and tax-free withdrawals if used for qualified medical expenses.
Below is a quick-and-dirty chart to help you manage your retirement plan retirement contributions for 2018 and to help you plan for contributions and deferrals in 2019.
Retirement Plan Contributions Chart 2018 vs 2019
Type of retirement account
401(k), 403(b), most 457 and Thrift Savings Plans
Annual contributions/age 50+
Annual defined contribution limit
Annual compensation limit
Highly compensated employee
Traditional and Roth IRA
Annual contribution/age 50+
Annual employee deferral
Age 50 and over
SEP Minimum compensation
SEP Maximum compensation
Defined Benefit Plans
Maximum annual benefit at retirement
Health Savings Accounts (HSA )
Maximum contribution/over age 55
Maximum out-of-pocket expense
Saving is key to a successful retirement.
One of the best ways to save is to take advantage of employer-sponsored plans and health savings accounts or saving on your own in an IRA. Make sure you are maxing out your annual contributions and that you are working with an advisor who can advise you on how to invest your tax deferred assets for growth.