New Benefit and Investment Thresholds

Each year, the U.S. government changes a variety of thresholds impacting benefits and investment contributions. These increases are usually tied to the inflation rate. For the past ten years, since inflation has been pretty low, most of the increases have been modest.

Below is a summary of the 2019 levels.

The contribution limit for IRA accounts has increased from $5,500 to $6,000. Remember, if you are over 50 you can make a catch-up contribution of $1,000.

Contributions to a traditional IRA may be tax deductible but the deductibility is specific to your situation. For example, if you do not have a retirement plan at work, contributions could be deductible depending on a combination of filing status, income level, and whether a spouse has a retirement plan at work. Tax simplification at its finest.

If you do contribute to a retirement plan at work, then IRA deductibility begins to be phased out starting at modified adjusted gross income of $64,000 (single) or $103,000 (married, filing jointly).

Roth IRA contributions are also currently capped at $6,000. However, your ability to contribute phases out completely at $137,000 of income (single) or $203,000 (married filing jointly).

The limit for 401(k) or 403(b) contributions will rise from $18,500 to $19,000 –and employees 50 and older will continue to be able to contribute an additional $6,000 as a ‘catch-up’ provision. The overall limit for the total amount that can be contributed to defined-contribution plans increased from $55,000 to $56,000.

Social Security beneficiaries will receive their biggest cost of living adjustment in seven years — up 2.8% from last year’s benefits. In 2019, a retired worker reaching full retirement age would get a maximum of $2,861 per month–an increase of $73 a month, or $876 annually. On average, Social Security beneficiaries will receive an extra $39 per month.

The age that Social Security defines As”full retirement age” will also increase by two months, to 66 years and six months for people that turn 62 in 2019. The full retirement age increases in 2-month increments during the next two years until it reaches age 67 for everyone born in 1960 or later.

People paying into the Social Security system will also see an adjustment. Next year, earned income up to $132,900 (up from $128,400) will be subject to the 6.2% Social Security payroll tax. Income above this amount is exempted from Social Security’s payroll tax.