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401k Contribution Limit for 2019

As we ring in the New Year, it’s time to consider boosting contributions to your employer-sponsored retirement savings plan—and the federal government is willing to help (a little.) The maximum contribution has increased this year, so you can shelter a bit more money from taxation, if you choose, to maximize your retirement savings.

For most workers, the 401k is their standard employer-sponsored retirement plan. Some workers, however, are enrolled in 403b or 457b plans, instead. While there are some minor differences between these plans, they are generally treated in a similar manner, and they usually have the same maximum contribution limits. The main difference between these plans is worker classification. Generally, 401k plans are used by for-profit businesses; 403b plans are used by tax-exempt groups, such as schools or hospitals; and 457b plans are for government workers, although there are some non-governmental organizations that also qualify to use these plans.

For simplification purposes, this discussion will refer to the most common plan, the 401k. The information is still relevant, though, if you are enrolled in either a 403b or 457b plan.

What Are The New Maximum Contributions?

According to the IRS, If you are under age 50, your maximum 401k contribution is $19,000 in 2019, which is an increase of $500 over 2018 limits. For workers 50 and over, the catch-up contribution of $6,000 remains constant, which means you can contribute a total of $25,000 in 2019 if you are 50 or older. Matched contributions from your employer are not included in these limits.

If you are enrolled in a 403b and 457b plan, there are some minor differences in the “catchup provisions” in these plans. You should check with your plan administrator to learn about the specific provisions of your plan.

As you can see, investing in your 401k, 403b or 457b is a valuable, easy way to reduce your taxable income, while building your future retirement funds. With compounding, $19,000/year will add up over time!

Do Those Numbers Sound Daunting?

While it’s great that the new 2019 limits will allow workers to save hefty sums of tax-deferred money each year, there are many people who are more worried about saving anything at all or scraping together enough to capture their entire employer match. If that sounds more like you, it’s still a good time to take a fresh look at what you can contribute to an employer-sponsored retirement plan.

Some of the best advice you can embrace for your future financial self is to save as much as you can and start as soon as you can. Your employer-sponsored retirement plan is a natural starting point. It is particularly important to try to qualify for all matching contributions, which essentially creates an instant return on your investment.

If you have trouble saving, look for ways to decrease your monthly expenses and make saving a priority. If you’re not feeling the pinch at least a little each month, you could probably save more—and you probably should. Your retirement account will play a major role in the financial security of your future self. Saving now can help make that account turn into a worthy safety net and give you some financial peace of mind.

Second 2019 Bonus For Savers: Recent Tax Changes

If you have diligently saved money in a tax-deferred account, pat yourself on the back. The 2018 tax reform bill is giving you a little bonus—in addition to higher maximum contribution limits. Tax reform put many workers into a little bit of a lower tax bracket, which means the money you’ve already socked away escaped being taxed at the previously higher rates.

Have questions about your retirement savings? Talk to a financial advisor.

Talk to a financial advisor.

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

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This year, my top financial priority is:

Building my emergency fund
Paying off high-interest debt
Budgeting better
Saving for a short-term goal, like a vacation or new car
Increasing my investment contributions
Maintaining status quo - I’ve got this under control

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