The IRS just announced increases to retirement plan savings limits and the Social Security wage base for next year. If you want to continue max funding your retirement plan, you may need to take action.
The 401(k) Deferral Limit is going up
What is it? The amount of your annual salary you can put aside into your 401(k).
What’s the update? The previous max of $18,500 has been bumped up to $19,000.
Now What? Consider refining your 401(k) salary contribution for optimum savings! Work for a non-profit or governmental agency: this increase also applies to 403(b), SARSEP, and 457(b) plans also!
For those aged 50 and over, the 401(k) Deferral Limit is also higher
What is it? The “Catch-up Deferral Limit” allows those closer to retirement age to save more into their plans.
What’s the update? The Catch-up Deferral Limit remains at $6,000, but the deferral max of $24,500 is now $25,000.
Also new for 2019: the Social Security Base Wage is rising from $128,400 to $132,900
What is it? The Social Security Wage Base is the maximum earned income that’s assessed a 6.2% tax rate for Social Security purposes (the larger portion of the “FICA” tax withholding on your paystub).
What’s the update? In 2018, earned income in excess of $128,400 escaped social security taxation. For 2019 you earning all the way up to $132,900 will be assessed the 6.2% tax. So it may take a little longer next year before your bigger (post SS tax) deposits start rolling in.
Since 1975, this base wage has continually increased to reflect the nation’s average wages, climbing over $25,000 in the past decade alone.
CliffsNotes:
- Increases to retirement plan limits will allow more salary to go into 401(k) accounts – take action to capture this higher max contribution!
- Next year, 6.2% of your first $132,900 (or $8,239.80) will be taxed for Social Security.
