If you’re saving money for retirement, listen up! The IRS just bumped up the limit for annual contributions by $500. Now, you can save $19,000 a year.
“It doesn’t mean a lot for a lot of people but politically it sounds great. So if you’re someone who’s not putting in the $18,500, I’m sorry to say it’s not really very meaningful to you. But if you are maxing out, put in more,” financial advisor Reina Schlager, CPA/PFS said,
Reina said you’ll probably only benefit if you’re older or have a high-paying job. The rest of us probably won’t save more money because of this change.
But you can try this. “Find out if your plan has the ability to have a Roth contribution because what you put into your 401k lowers how much of your wages are going to be taxable,” Schlager said. “If you put into a Roth 401k that’s not going to lower your tax bill, but when you retire that money’s going to come out tax free.”
The IRS said it raised the contribution limit to factor in the cost of living, which has continued to grow. So should we expect the limit to increase every time the cost of living goes up?
“Yes. I think the cost of living has gone up in the past 6 years so they’re not directly tied to each other. It’s not like every time there’s an absolute cost of living increase they absolutely take it back up again. So it’s at their discretion,” James Gallagher, a financial planner, told HelloSWFL in a phone interview.
So those of you with a retirement plan in place, keep it going. Remember to contribute as much as you can, as often as you can. Make the payments automatic if that’s easier for you.
“If you are making a lot of money, if you want the kind of lifestyle you expect in retirement, you need to save now and you need to save more now. And there are a lot of different ways to do it,” Schlager said.