401(k) Contribution Limit Increases for 2019
posted by Fisher 401(k) December 5, 2018
If you offer a 401(k) plan at your small business, you and your employees will see some changes to 401(k) contribution limits in 2019. Specifically, contribution limits for employees who participate in 401(k), 403(b), and other select government savings plans will increase from $18,500 to $19,000.
Along with this change, there are a few other highlights for 2019 that might be helpful for you or your employees to know:
• The annual overall limit on contributions to a participant’s account has increased to $56,000 for 2019 (or capped at 100% of the participant’s salary if they are paid less than $56,000).
• For participants over the age of 50, catch-up contributions remain at $6,000, in addition to the $19,000 limit.
• The annual limit for IRA contributions will increase for the first time since 2013 to $6,000.
• The qualifying income cap for the Saver’s Tax Credit for workers has increased to $64,000 for married couples filing jointly, $48,000 for heads of household, and $32,000 for single filers.
How much am I allowed to save in my 401(k)?
Each year, the Internal Revenue Services (IRS) releases updated contribution limits for retirement plans. Some years, contribution limits will increase, but not always. As of 2019, you are allowed to contribute up to $19,000 in your 401(k). Additionally, employees over 50 are allowed an extra $6,000 in catch-up contributions in order to save more for retirement.
What if I want to save more than that?
There are a few options if you want to save beyond the $19,000 limit. You can choose to set up your own Individual Retirement Account (IRA), which will allow you to save up to $6,000 per year (or $7,000 with catch-up contributions) and grow that money through investments just like a 401(k). There are also Roth IRAs, which require you to pay taxes prior to saving into your account, but make withdrawals tax-free later in retirement. Note that there are some income limits for the tax benefits of IRAs that means some higher-paid individuals won't get those tax perks. Finally, if you aren't worried about paying taxes on your savings, you can also set up a brokerage account to invest and grow money for retirement.
For a comprehensive list of contribution limit increases for 2019, check out our resource: 2019 401(k) Contribution Limits for Retirement Plans.
2019 401(k) Contribution Limits
|Elective Deferral Limit*||$19,000||$18,500|
|Annual Contribution Limit||$56,000||$55,000|
|Annual Compensation Limit||$280,000||$275,000|
*Catch-up provision of $6,000 per year available to all employees age 50 and older during the calendar year.
**A highly compensated employee (HCE) is an employee who earned more than $120,000 in the preceding year, as well as any 5% owner.