A new calendar means a blank slate of opportunity for self-improvement, and an entire year to accomplish it. According to Inc., saving more money was among the most popular New Year’s resolutions for 2019, just behind heathy eating, exercise and weight loss. Not surprisingly, the same study found that only eight percent of us are successful in sticking with those plans.
Fortunately, the calendar change often means increased opportunities to save more, especially for the long term. Of course, you’ll want to consult with an accountant, tax professional or financial advisor to figure out what’s best for you, but it may be helpful to understand what changes you might benefit from first in order to best prepare for those conversations.
In November, the IRS announced an increase in the annual amount employees can contribute to 401(k), 403(b), and similar plans, from $18,500 to $19,000. This amount is before your employer’s match. Also, employees older than 50 can make a catch-up contribution of $6,000, which is unchanged from 2018.
The IRS also increased the contribution limit on IRA accounts from $5,500 to $6,000. At the same time, they raised the income limits for contributing to a Roth IRA and for being able to deduct contributions to a traditional IRA. Phase out limits vary by IRA type and filing status, but the information is readily available on the IRS website.
Another increasingly popular savings vehicle is the Health Savings Account, which may offer the triple benefit of tax-deductible contributions, and tax-exempt growth and withdrawals. For 2019, the contribution limits for HSA accounts have been increased, to $3,500 for individuals or $7,000 for families. You need to be in a high-deductible health plan to qualify, but many people are now eligible for them.
If you’re already contributing to any of these plans, it might be worth it to increase your regular contributions to get the most of the higher limits. Even if you weren’t contributing the maximum already, using an upcoming raise, bonus or tax refund might be a great way to get you closer to it. If you aren’t already contributing, the best way to start is by automating small, regular contributions to those plans. Your 401(k) already works this way, but you can easily set up recurring transfers to most IRA and HSA plans, too.
No matter which tools you find work best for your long-term plans, it’s always important to stay on top of the changes that are made to them each year.
— Joe Mecca, vice president for communications, Coastal Credit Union
