Whether you refer to it as a ‘New Year’s resolution’ or you simply use January as a symbolic fresh start, everyone has an annual opportunity to reaffirm our commitment to personal finance well-being.
One way to recommit ourselves to a healthy financial future is to save towards retirement. Some of the most popular types of plans:
The IRS guidelines for the amount you are able to contribute towards retirement can fluctuate on an annual basis due to inflation.
Let’s review the 2019 contribution limits to see if you’re able to squeak out any additional contributions or tax savings for the 2019 year.
Traditional and Roth IRAs have a $6,000 limit with an additional $1,000 catch up amount permitted for those over age 50. For Simple IRAs, the limit is $13,000.
IRA Points to Keep in Mind
- Traditional IRA contributions can be before tax by deducting the contribution above from your taxes – assuming you are under the earnings limit allowed by the IRS.
- If you are over the earnings limit, you are still able to contribute to a Traditional IRA, you just aren’t allowed to take the tax deduction.
- Simple IRA contributions are pretax.
- Roth IRA contributions are after-tax and allow for growth while eliminating the capital tax required with a withdrawal.
- There is an earnings limit for Roth IRA contributions as well, so be sure to check before making the contribution.
Take Advantage of Your Employer’s Plan
Not everyone has access to an employer-sponsored retirement plan such as a 401(k) or 403(b), but those who do have a significant savings advantage. There is no earnings limit and the contribution limit is $19,000 with an additional $6,000 catch up amount allowed for anyone over age 50 (or up to earned income).
Participants are typically able to contribute with either pretax or Roth money. A percentage of a participant’s contributions may also be matched by their employer which provides even more reason to stock money into your retirement plan.
If you aren’t financially able to contribute the allowed IRS maximum, at least maximize your employer’s match if you have a 401(k) or 403(b) available to you.
For example: If your employer matches 100% on the first 6% you contribute, contribute at least 6%.
I Don’t Have An Employer Plan
If you don’t have an employer retirement plan or can’t reach the IRS maximum allowed, a good goal to set is to save 10% of your income for retirement.
Be sure to talk with your tax advisor regarding the above as everyone’s situation is different.