Do You Know Your Limits?
By limits, I am talking about financial limits. How much can you save toward retirement in a Traditional or Roth IRA? What about in a 401(k)? Can you save more if you are age 50+? What is the gift exclusion? When I ask people these questions, I am often met with a variety of answers, often old information of what the limit used to be a number of years ago. It can be a lot to keep up with, but there are some key nuggets of information that are pretty important. After “testing” yourself on the questions above, the answer key is as follows:
In 2019, the gift exclusion is $15,000. You are able to save $6,000 in a Traditional or Roth IRA if under age 50 and $7,000 age 50+. You may make a salary deferral of up to $19,000 in a 401(k) if under age 50 and up to $25,000 if age 50+. Employers can match up to 25% in a 401(k) up to a maximum of $56,000 and the total employer/employee contribution in a 401(k) cannot exceed $56,000. Please note that plan limits may vary.
These numbers may be higher than what you remember. Perhaps you might take a second look at your retirement and gifting planning.
This information is provided for educational purposes only and is not intended as specific advice any individual. Seek professional advice before taking any action in regard to your finances.
Contributions to a Traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result I a 10% IRS penalty tax in addition to current income tax.
The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.