October 15, 2019
The third quarter of the year is in the books and we move boldly and bravely into the last quarter of 2019. And as we approach the end of the year we need to think if we have hit the limits of our retirement account contributions. If you’re still working this is a worthwhile endeavor. Here is a quick list of the particular retirement plan limits (there are a mirade of retirement account possibilities.)
Type of Account Limit per tax year Per Month 50 YOA or over? Per Month
401K $19,000 $1,583 +$6,000 $2,083
403B $19,000 $1,583 +$6,000 $2,083
457 $19,000 $1,583 +$6,000 $2,083
SIMPLE $13,000 $1,083 +$3,000 $1,333
IRA $ 6,000 $ 500 +$1,000 $ 583
*Roth versions of the above (if available) are subjected to the same limits.
Retirement is simply another name for not working for a paycheck. If you are leaving your job for retirement, it is difficult to change directions and return to work for the same amount of money. Consequently, when you are walking away from a steady paycheck, make sure you have saved enough from current gratification to prepare for a long period of future gratification. Saving today is the sacrifice you make for a better future. And money is the device you use to store that future value.
So if you’re looking at your paycheck–or if you’re self-employed, the company balance sheet–and you see that you’re not close to those numbers listed above, then it’s time to evaluate your cash flow. If you find room for improved retirement savings, then let’s get to work. There is still time this year to move the deposits to the limits. Trying to hit the limits will require some math and timing, depending on how long your payroll source can implement the increase, but hey, you have two and a half months to go, so don’t wait.
For a regular IRA, you can defer from your income this year $6,000 with an extra $1,000 if you’re 50 and older. Or, you could use the spousal contribution if you did not work, and your spouse brought home the bacon. A check to the IRA custodian is all that it is needed.
Each year the limits are adjusted for inflation but only change when certain thresholds are met, i.e., $500 increments for IRA’s. Moreover, January is a good time to adjust your contributions for next year since the new limits will be known, and you have a whole year to spread the deposits out. Plus, if you are reaching the 50-year-old milestone, that allows you to increase your savings.
Lastly, don’t forget that you can and should be saving outside of your retirement accounts. For the most part, retirement accounts are illiquid, and even though, technically, they’re not, you need to look at them in that light since the penalties and taxes or forgone future earnings are steep. So, for short-term projects or simply saving more than the IRS allows retirement plans, we can use an investment account. With monthly deposits over long periods, you can build a substantial pile of money. A pile of money is always a comforting scenario.
Give me a call if you’re looking to review your accounts. It’s a good time to get out of the office, so feel free to schedule a lunch meeting so we can go over these things in person.
Thanks so much for reading, Marty
106 Spring Ave., Chestertown MD 21620—also known as, The Center of the Universe.
