For anyone saving for retirement, you can now sock away even more cash. The IRS has increased the contribution limits for various retirement accounts for 2019.
New contribution limits:
- Contribution limit for employees who participate in a 401(k), 403(b) and most 457 plans, as well as the federal government's Thrift Savings Plan, is increased from $18,500 to $19,000
- The limit on annual contributions to an IRA, which hadn't increased since 2013, were raised to $6,000 from $5,500
- Catch-up contribution limit, which is a higher threshold for employees 50 years or older using these accounts, remains unchanged at $6,000
- The changes were among several inflation adjustments announced by the IRS Thursday
A 401(k) plan is one of the most common employer-sponsored retirement accounts. 403(b) plans is another type of retirement plan, used for public school and nonprofit employees. And 457 plans are another retirement account, more common for government employees.
The changes come at a crucial time. As FOX Business recently reported, many Americans are not prepared for retirement. In fact, nearly half of Americans (48 percent) don’t think their retirement savings will ever reach $1 million, according to a recent study by Fidelity, even though more than 30 percent of Americans expect to need more than $1 million to live on after they stop working.
Are you saving enough for retirement?
An analysis by the Boston College Center for Retirement Research determined the percentage of income individuals belonging to different age groups would need to save each year in order to reach a salary replacement rate of 70 percent for those planning to retire at the age of 65.
- For individuals that begin saving for retirement at the age of 25, stashing away 10 percent of income annually should be sufficient to reach salary replacement goals
- Americans that begin saving at the age of 35 need to up their annual contributions to 15 percent of income
- At 45, an individual would need to invest slightly more into their retirement accounts each year, at 27 percent
- The calculations are based on median income and assume that contributions will be consistent on an annual basis
If you are not saving as much as you want, you can keep working long past retirement age and you won't be alone. The number of Americans above traditional retirement age (65) remaining in the labor force, either part-time or full-time, climbed to nearly 19 percent in 2016, up from 12.8 percent in 2000, according to data from the Pew Research Center, as explained by FOX Business.
FOX Business' Brittany De Lea and the Associated Press' Sarah Skidmore Sell contributed to this report.