Every year, the IRS releases new requirements and limits for Individual Retirement Account (IRA) contributions. Getting all the facts today can save you from making potentially costly investment mistakes down the road. Keep reading to learn more about 2019 IRA contribution limits and how they differ from 2018.
IRAs can be vital tools in your retirement investment strategy. They allow you to increase the amount of money you sock away each year, beyond the scope of your employer-sponsored 401k plan – to a certain degree.
You will need to pay attention to IRS contribution, age, and income limits for IRAs to avoid making a mistake that could cost you in additional taxes for each year an excess contribution remains in your retirement account.
2019 IRA Contribution and Income Limits
The standard limit for IRA contributions increased by $500 in 2019, to $6,000 for maximum contributions to Roth and traditional IRAs and a total of $7,000 for those 50 years of age or older who wish to make “catch up” contributions.
Employer-sponsored SEP IRAs are allowed to contribute a maximum of 25 percent of the employee’s income or $56,000, whichever amount is the lower of the two.
Additionally, you cannot contribute more than your income for the year toward your IRA. That means that if you earn only $5,600 in 2019, you cannot save the $6,000 maximum contribution that would otherwise be an option. Also, if you have both a traditional and a Roth IRA account, the contribution limit applies to both accounts, meaning your combined contributions cannot exceed the $6,000 limit.
However, there are income limits for IRA contributions to consider as well. Knowing these can help you determine the best method for investing in your retirement in 2019.
Roth IRA Limits for 2019
- For jointly filing married couples, phase-out begins at $193,000 - $203,000.
- For couples who are married and file separately, phase-out begins at $0 - $10,000.
- For single individuals, phase-out begins at $122,000 - $137,000.
- For Heads of Household, phase-out begins at $122,000 - $137,000.
Traditional IRA Limits for 2019
- For single individuals with workplace retirement plans, phaseout begins at $64,000 - $74,000.
- For married couples filing jointly with workplace plans, phase-out begins at $103,000 - $123,000.
- For married couples filing jointly without workplace plans, phase-out begins at $193,000 - $203,000.
- For married couples filing separately, phase-out begins at $0 - $10,000.
- For single individuals without workplace plans, phase-out begins at $122,000 - $137,000.
Traditional IRA income limits differ for those who have workplace retirement plans, whereas there is no distinction to keep in mind for Roth IRA contributions.
Types of IRAs
There are seven different types of IRAs you might consider for your retirement savings. Some types of IRAs may be better for you than others, depending on your retirement goals or your current employment situation. They include:
- Traditional IRAs
- Roth IRAs
- SEP (Simplified Employee Pension) IRAs. These IRA accounts are completely employer-funded accounts.
- Nondeductible IRAs
- Spousal IRAs
- Simple IRAs
- Self-Directed IRAs
While Roth and traditional IRAs are the most commonly used retirement accounts, they are not the only options available to you. Once you have all the facts and figures, you may find one of the other types of IRAs might be a more attractive option.
Ultimately, IRAs offer an additional opportunity to sock a little more income away to support the retirement lifestyle you’d like to lead. Just make sure you don’t cross the IRS and their requirements and limitations in your efforts to save for your golden years. Maximize your IRA investment by investing the contribution limit into your account each year.
Individuals can review the November 1, 2018 announcement issued by the IRS for additional information.