On November 1, 2018, the Internal Revenue Service in Notice 2018-83 published the cost-of-living adjustments that apply to dollar limits for retirement plans for the tax year beginning on January 1, 2019. As anticipated, due to an increase in the cost of living1, most limits were raised with a few remaining at 2018 levels.
Individual Retirement Account (IRA) contribution limits and SIMPLE IRA deferrals increased by $500 while catch-up amounts will stay the same. Notably, the last increase for Individual IRAs was in 2013. Annual maximum contributions, defined benefit caps, maximum plan compensation, elective deferral limits for 401(k), Roth 401(k), 403(b), Roth 403(b), and 457 Plans experienced a minor step-up.
Earlier, on October 11, the Social Security Administration announced a 2.8% cost of living adjustment to benefits, the largest increase since 2012. This adjustment will increase benefits by $468 per year on average. The Taxable Wage Base increased from $128,400 to $132,900. This results in a monthly $46.50 Social Security tax increase year-over-year for those with earned income at or above the limit; the new maximum is now $16,479.60, up from $15,921.60 in 2018.
Among other notable increases is the amount individuals under full retirement age may earn before experiencing a decrease in their Social Security payments. The 2019 limit increased by $600 from $17,040 to $17,640; after that, $1 of benefits is deducted for every $2 earned above $17,640.
Cetera Retirement Plan Solutions has highlighted the year-over-year changes for easy identification: View 2019 Limits
If you have questions or would like to discuss how these changes may impact you, please contact your Synergy advisor.
1As measured by the Bureau of Labor Statistics (BLS) Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the period covering the third quarter of 2017 to the third quarter of 2018.
This summary is designed to provide an overview of the dollar limitations for retirement plans applicable in 2019 and is not intended to be comprehensive. It is intended for general information only and is believed to be accurate and reliable as of posting date but may be subject to change. For a complete announcement of the applicable limits see Notice 2018-83 and Social Security Administration’s 2019 Social Security Changes Fact Sheet.
Cetera Retirement Plan Solutions does not provide investment, tax, or legal advice. Individuals should seek services from the appropriate tax and legal professionals as to applicability of this information in for their individual circumstances.