401k And IRA Contribution Limits For 2019

For the first time since 2013, the amount you can contribute into an IRA is increasing, from $5,500 to $6,000 ($7,000 if age 50 or older). The 401k contribution limit is increasing as well. The amount of pay you can defer into your 401k plan goes up from $18,500 to $19,000 ($25,000 if 50 or older). This chart details the 2019 contribution limits for various accounts, as well as the gift and estate tax exclusions. Take a look:

(source: IRS.gov)

 A couple things to highlight regarding IRA contributions:

  • Your ability to deduct IRA contributions may be limited/restricted if you already contribute into a 401k plan. Check with us or your CPA before doing so.

  • The $6,000 limit covers all IRA plans you own. For instance, if you intend on making both Traditional IRA and Roth IRA contributions, you can split the $6,000 between accounts but your cumulative contribution cannot exceed $6,000. Meaning, you could not deposit $6,000 into one IRA and another $6,000 into a second IRA. But you could do $5,000 into one IRA and $1,000 into another IRA, or $4,000 into one and $2,000 into another, etc.

  • If you plan on making a Roth IRA contribution, we advise waiting until the calendar year is over to do so, rather than make recurring monthly contributions. This ensures that your income does not exceed the IRS limit that prevents you from making Roth contributions. You have until April 15th of the following year to make IRA contributions for the prior year, so there is plenty of time. You don’t want to risk funding a Roth IRA throughout the year, only to learn that your income was too high and have to scramble to get the funds out of the Roth to avoid paying a penalty.

  • The above IRA limits apply to 2019, not 2018. I emphasize this because if you plan on making IRA contributions for 2018 (deadline to do so is April 15, 2019), the contribution limit of $5,500 applies ($6,500 if age 50).