IRS Increases 2019 Contribution Limits

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Great news if you are adding savings to a retirement plan!

The IRS has just announced an increase in contribution limits for 2019. Further, these increases apply to accounts like the Solo 401k, traditional IRA and even Roth IRAs.

The regulatory body increases contribution limits almost every year s a part of an annual inflation adjustment. Bigger retirement contribution limits mean bigger contributions. Those larger contribution amounts can help to lower your tax bill. Additionally, those contributions can help grow your nest egg faster by increasing the amount of funds socked away in your retirement plan.

Traditional and Roth IRA

The new contribution limit for IRAs is $6,000 per year. This is up from a previous limit of $5,500 in IRA contributions. This marks the first IRA contribution increase since 2013.

Corporate and Solo 401k Plans

401k contributors get an extra $500 to contributions as well. The new contribution limit for 2019 is $19,000 before taxes per participant into a 401k plan.

Catch-up Contributions

If you are age 50 or older, you can contribute a bit extra to your retirement plan. However, catch-up contribution limits are not changing for 2019. IRA catch-up contributions remain the same at $1,000. 401k and Solo 401k catch-up contributions remain level at $6,000.

This brings your total traditional or Roth IRA contribution to $7,000 if you are age 50 or older.

Total Solo 401k Contributions

If you are self-employed, the Solo 401k can provide you the greatest amount of contribution of any retirement plan. The overall tax-deductible amount you can contribute to a Solo 401k plan is $56,000 for 2019.

Because you are the employee and the employer of your small business, you are allowed to make two types of contributions:

  1. Employee salary deferral contributions
  2. Employer profit-sharing contributions

Additionally, the Solo 401k by Nabers Group allows a third type of contribution: the Voluntary after-tax contribution

With the Solo 401k, you can max out your employee salary deferral contributions at $19,000 according to the new IRS limit. That means you can contribute an additional $37,000 as a profit sharing contribution because you are also the employer. Playing both roles of employee and employer of your small business is a great perk when it comes to retirement plan contributions.

If you are age 50 or older and have a Solo 401k, your total contribution can be $62,000 per year, tax deductible. That’s because you get a catch-up contribution of $6,000 in addition to your employee and employer contributions.

To find your Solo 401k contribution, check out our contribution calculator.

Remember, to qualify for a Solo 401k plan you must have your own small business with no full-time W2 employees other than yourself and your spouse. The business can be anything, great or small. Learn 20 ways to qualify for the Solo 401k plan.

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