Fall is quickly approaching. Every October the IRS (Internal Revenue Service) releases their updated retirement limits for a number of accounts. The Roth IRA is one particular account that many will be looking at.
For 2018, the contribution limit for a Roth IRA is $5,500 with an additional $1,000 catch-up for individuals over the age of 50. The 2019 Roth IRA contribution limits will be announced by the IRS in less than two months.
The government uses inflation numbers to determine when and by how much to raise retirement limits. When it comes to IRA’s, any annual increase in contribution limits will be in $500 increments. Meaning that there are only two possibilities when it comes to the 2019 Roth IRA contribution limits.
Either the limits remain the same at $5,500 ($6,500 for individuals 50 or older) or it is increased to $6,000 ($7,000 for individuals 50 or older). It is expected that the 2019 Roth IRA contribution limits will increase to the latter amount.
So what does an increase in $500 a year for a Roth IRA account mean? Well, for starters, instead of being able to contribute an awkward $458.33 per month to the account, you will now be able to contribute an even $500. Of course this only applies to individuals under the age of 50. Contributing on a consistent basis has proven time and again the best way to invest. You can take advantage of the market when it hits various highs and lows.
Are you worried that you won’t have the additional funds to contribute an extra $500 a year to a Roth IRA? Then now is as good of a time as ever to go and create your very own free budget. The best way to see where you are spending your money every month is to track it. Although it might seem like a challenge at first, you will most likely be able to find a way to contribute the additional $41.67 per month to your Roth IRA.
Why choose a Roth IRA? There are many benefits to having one. First and foremost, the money you put into it will grow and compound tax free through the years. Additionally, when you do decide to withdraw from the account, you will not be required to pay any income taxes on the withdrawals. It’s an especially good account to have in order to help offset tax burdens brought on by 401k’s and social security.
With the official numbers for the 2019 Roth IRA contribution limits less than two months away, we will have to wait a little longer, but we can predict that more than likely the amounts will increase.
Budget Smart, Invest Wise
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James Hendrickson is an internet entrepreneur, blogging junky, hunter and personal finance geek. When he’s not lurking in coffee shops in Portland, Oregon, you’ll find him in the Pacific Northwest’s great outdoors. James has a masters degree in Sociology from the University of Maryland at College Park and a Bachelors degree on Sociology from Earlham College. He loves individual stocks, bonds and precious metals.