In 2019, individuals saving for retirement in Georgia and throughout the country will be able to contribute more to their accounts. The IRS announced that the maximum annual contribution to an IRA will increase to $6,000 from $5,500. Those who have a 401k or similar plan will be able to contribute up to $19,000 annually starting in 2019. A person who is 50 and older will be able to make additional catch-up contributions of $1,000 into an IRA and $6,000 into a 401k.
Phaseout ranges for both traditional and Roth IRAs were also increased for the 2019 tax year. Those who contribute to an IRA, 401k or similar retirement accounts may glean a couple of benefits from doing so. First, an individual may receive a tax break in the year that the contribution is made or withdraw the money tax-free later in life. Second, it is not uncommon for employers to match contributions made to employee 401k accounts.
This represents free money in a person’s account that will compound over the life of the account. IRA contributions must be made by the time an individual files his or her tax return for the previous tax year. Therefore, anyone who wants to take a tax deduction on a 2018 return would need to make a contribution by April 2019.
Saving for retirement may help a person secure their financial future while also reducing their tax burden. Legal professionals may be able to help taxpayers who have questions about the tax implications of contributing to a retirement account. For instance, they may be able to explain the difference in tax treatment between a traditional and Roth IRA or 401k. This may help a person stay in compliance with tax laws while also adequately planning for retirement.