The basic limit on elective deferrals such as your 401(k) is $19,000 ($25,000 if you are 50 or over) in 2019, $18,500 ($24,500 age 50 or over) in 2018, or 100% of the employee's compensation, whichever is less. The elective deferral limit for SIMPLE plans is 100% of compensation or $13,000 ($16,000 age 50 or over) in 2019 and $12,500 ($15,500 age 50 or over) in 2015 - 2018. For 2019, your total contributions to all of your traditional and Roth IRAs cannot be more than $6,000 ($7,000 if you are 50 or older), for 2015 - 2018 the limit is $5,500 ($6,500 age 50 or older).
We sat down with Ted Byer, Member of the Firm, to discuss the 2019 Qualified Retirement Plan Amounts. Ted shares his thoughts on how to plan accordingly now that the IRS has released this new and valuable information.
What can clients do now to make their transition into retirement run smoothly?
“Start early and be disciplined and have goals. Failing to plan is planning to fail. Starting early means less catch-up when you are old and gray.”
What other financial checkups can your clients prepare for, prior to the year-end?
“The first thing to do is to look at your taxes prior to year-end. Because of the new tax law, taxes will be going up for many of our clients in New York and New Jersey, due to the loss of the state and local tax (SALT) itemized deduction. And then to compound the problem, the withholding tables’ rates went down, putting more income in your paycheck, so now a bigger tax bill in March or April may be the result. It is better to know that now.
“If you have a 401(k) contribute the most you can afford. If you haven’t hit the contribution maximum, go to your employer and have them withhold to the max before year-end. And this is even more important if your employer provides a matching contribution.”
Once the retirement starts, how does all the pre-planning contribute to the end result?
“I like to compare this to a climb on Mt Everest: You save and save and make it to summit, then you die on the way down. More people die on the way down than on the way up. It’s not the accumulation phase but the distribution phase, that is so important. The key is to not outlive your money. I have heard of people who have saved a million dollars, then in retirement, buy a condo, take trips around the world, and then have nothing left, all the while - still being young and healthy. You need to plan for the distribution phase. That is the most important. That’s how the pre-planning helps the end results.
“The easy part is to determine the amount to save to get to Mt Everest, then it is up to the client to be disciplined to save; and then to look at reality and determine how to best allocate the funds on the way down from the mountain.”
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Contact Ted, or your trusted advisor at Smolin, for help with any of your wealth management needs. We have the expertise and experience to help guide you through this phase of your financial success.
*Smolin Partner Ted Byer, CPA, PFS, CFP