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A Cost of Living Gift For the Holidays

November 27, 2018

As we all launch into the spending season of the holidays, this is just a gentle and somewhat Scrooge-like reminder that after this glorious month of finding sparkly ornaments and tiny tree-shaped candles irresistible, January will come knocking on your door. And as you are celebrating a new year and new you with a gym membership and a commitment to a nutritional cleanse, your retirement will be lurking in the background waiting to be funded. Thankfully, our contribution limits have a cost of living adjustment in some years. This allows you to invest more so you can fund your retirement, which grows more expensive each year.

If these contribution limit increases aren’t exciting enough to motivate you to invest, consider this:

  • It's your retirement. If you want the government to fund it, so be it. But if that’s not all that you want, start putting money away now.
  • If you are lucky enough to work for a company that matches your contribution, please at least contribute the amount needed to get all of that free money. For example, if they match “100% up to 3%,” then make sure you are contributing at least 3%. Then your total contribution will be 6%.
  • A worker who invests $5,000 per year in an account that has a 5% return each year will have a little over $170,000 at the end of 20 years. If that worker delays the investment by 5 years, she will only have just over $110,000. Time is on your side - take advantage of it and start today.

See below for your type of plan and what you can plan to invest in 2019:

Employees who have a 401(k), 403(b), 457 plan, or the federal government’s Thrift Savings Plan can increase their annual contribution from $18,500 to $19,000.

Those who invest in an IRA will see their first increase since 2013 - from $5,500 to $6,000.

The “over 50” catch-up contribution for IRAs remains at $1,000, and the catch-up for 401(k), 403(b), 457, or the federal government’s Thrift Savings Plan, remains at $6,000.

There are also increases in the income ranges that make you eligible to make deductible contributions to traditional IRAs and to contribute to Roth IRAs. For Traditional IRAs, here are the phase-out ranges for 2019:

  • For single taxpayers with a company retirement plan, the phase-out range increased $1,000 to $64,000 - $74,000.
  • For married couples filing jointly, where the spouse making the IRA contribution has a company retirement plan, the phase-out range increased $2,000 to $103,000 -  $123,000.  
  • For an IRA investor who does not have a company plan but is married to someone who does have a plan, the phase-out increased $4,000 to $193,000 - $203,000.

For Roth IRAs, the phaseout ranges also increased:

  • For single taxpayers, the phase-out increased $2,000 to $122,000 - $137,000.
  • For married couples filing jointly, the phase-out increased $4,000 to $193,000 - $203,000.

If your retirement plan isn’t listed here, you can talk to your HR department (if employed) or your CPA (if self-employed), or check out the IRS page that details more plans and their 2019 contribution opportunities here.

You may still be wondering how you would know how much to invest to achieve your retirement goals, especially with so many other priorities on your plate. That is the purpose of a financial plan and what we do all day long. If you need to know how to use your money to have the life you want, contact us at