Most of us know we should be saving for retirement, but stashing away enough cash to fund your golden years can be easier said than done. However, the IRS just made it a little easier by announcing that it will increase the limits on 401(k) and IRA contributions in 2019.
Under the new limit, the cap on contributions to a traditional or Roth IRA will rise from $5,500 to $6,000. For those ages 50 and over, the cap will remain at $1,000. Those who contribute to a 401(k), 403(b) and most 457 plans as well as the federal government’s Thrift Savings Plan will be able to contribute up to $19,000 before taxes in 2019, up from $18,500.
Although the increases may not seem significant, statistics indicate that most Americans can use all the help they can get in making sure they will be financially prepared for retirement.
“We’ve moved from a collective retirement system to one in which each person is expected to go it alone,” Kara Stein, commissioner for the U.S. Securities and Exchange Commission, explained in the conversation with the Brookings Institution last month.
“About three out of every four adults in the United States lives in a household with at least one type of investment account and an overwhelming number of those investment accounts are retirement accounts,” Stein continued. “But unfortunately, most Americans are not and may never be prepared.”
Indeed, according to a recent report published by the Stanford Center on Longevity, about 50 percent of Americans are not financially prepared for retirement. The researchers found that about half of Americans are participating in work-based retirement savings plan and contributing about 6 to 8 percent of their income on average, but they should be saving around 10 to 17 percent of their current income in order to retire at age 65.
Do you plan to save more for retirement in the coming year?