Financially Speaking: Great News for Retirement Savers in 2019
By LouAnn Schulfer, AWMA®, AIF®
Accredited Wealth Management AdvisorSM
Accredited Investment Fiduciary®
I am excited to share some great news for retirement account savers in 2019! The amount you are allowed to contribute, as well as the income thresholds which make contributions permissible have both risen for the first time in six years!
Since 2013, contributions to Individual Retirement Accounts (IRA’s) have been capped at $5,500 if you are under age 50 and $6,500 if you are 50 or older. For tax year 2019, that amount goes up to $6,000 for those under 50 and $7,000 for those 50 and over. For traditional IRA’s, you are allowed to deduct your contribution amount from your taxable income, and for ROTH IRA’s, the contributions are made with after-tax dollars, both being subject to income threshold limits depending on your tax filing status (single, married filing joint, etc.).
If you participate in a 401(k), you are allowed defer up to $19,000 of your salary if you are under 50 and up to $25,000 if you are 50 or over. These new limits for 2019 represent a $500 increase from the previous six years. Many employers offer matching contributions, sweetening the deal of saving for your future even more.
There are other rules to remember when making IRA contributions. You must have earned income, and if that earned income is less than the maximum allowable contributions, that is your limit. Earned income is different than taxable income. You may have taxable income from IRA distributions, for example if you have inherited an IRA subject to required distributions. That distribution is taxable but not counted as earned income. You are not allowed to make traditional IRA contributions if you are over age 70 ½, even if you have earned income. ROTH IRA contributions are allowed at any age, as long as you meet the requirements of earned income while staying under the maximum income thresholds that allow contributions.
Be sure you are familiar with the rules for contributions. If you violate the IRS mandates you will be subject to penalties. Consult with a qualified advisor. You may also visit www.irs.gov/retirement-plans/
LouAnn Schulfer is co-owner of Schulfer & Associates, LLC Financial Professionals and can be reached at (715) 343-9600 or louann.schulfer@lpl.com. www.SchulferAndAssociates.com
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. Schulfer & Associates, LLC Financial Professionals and LPL Financial do not provide tax advice. Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax. The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.
