New! 2019 Retirement Plan Contribution Limits

Great news for savers and those who wannabe better savers. The IRS announced that retirement plan contribution limits are increasing for 2019. Maybe you are not even close to the annual limits on your retirement savings plans. Or, maybe you consistently max them out. Whatever the case may be, take some time before the new year starts to review your retirement savings strategy.

2019 Thrift Savings Plan (TSP) Limits

The annual Elective Deferral Limit for the TSP is increasing by $500 in 2019. It has increased from $18,500 in 2018 to a new total of $19,000 in 2019. Whether you are a military or civilian federal employee, $19,000 is the maximum you can personally contribute to your TSP in 2019 (under normal circumstances). To break it down, if you want to max out your TSP contributions for 2019, that would mean you would need to contribute $1,583.33 per month in 2019. That’s a lot of cash money, I know. However, whether your goal is to max out the TSP or just keep increasing your contributions year over year, it’s something you can work towards.

If you qualify for a TSP account and you’re not already investing with the TSP, plain and simple, you are missing out!

Additional Things to Consider

There’s another annual contribution limit for the TSP, and it’s known as the Annual Addition Limit. In 2019, the limit is $56,000. It gets a little complicated here, so stay with me. The additional annual limit is the total limit of all the contributions that you AND your employer make on your behalf in a year. So, if you are a FERS employee or a military member who has BRS, this limit includes what you personally contribute through your Elective Deferral Limit ($19,000) + whatever your agency contributes through the automatic contribution and matching contributions.

Where it becomes more complicated for servicemembers, especially those who have BRS is when they are deployed to designated combat zones. When deployed, many servicemembers want to make the most of this Annual Addition Limit as well as their BRS match. Careful choices about Roth versus Traditional contributions and monthly contribution strategies must be thought through. The Godfather of Military Finances aka Doug Nordman aka The Military Guide has a great post on maximizing your TSP contributions in a combat zone. His post even has an excel worksheet you can plug your own numbers into. I know this isn’t rocket science, but sometimes it sure feels like it is.

Lastly, if you’re age 50 or older, you have one more chance to add additional savings to your TSP. The 2019 Catch-up Contribution Limit remains the same at $6,000 for 2019. This contribution limit is separate from your normal Elective Deferral Limit and Annual Addition Limit.

2019 Employer-Sponsored Defined Contribution Plan Limits

Similar to the TSP, if you or your spouse is employed by a company or agency outside of the Federal government, you might have a 401(k), 403(b), or 457 employee-sponsored retirement plan. The 2019 limit for employer-sponsored retirement plans is also $19,000 with a $56,000 Annual Addition Limit. The 50 and older catch-up limit is also an additional $6,000.

Depending on your employers, your plan might also have ROTH or Traditional options, automatic contributions or matching. Take some time to look into your employer’s retirement plan’s benefits and offerings. You don’t want to miss out on employer-matching contributions, that’s basically just free money! Just like how the TSP has specific investment options, so does your employer’s plan. Take some time to carefully review where your contributions are being invested. Nearly all large plans offer some type of investment advice option. Whether it’s robo-algorithm based or you can speak with an actual person, ask for help if you don’t understand. If you don’t understand your plan, there’s a good chance you might not be making the most of it.

2019 Individual Retirement Arrangements (IRA) Limits

Anyone, military or civilian can contribute to an IRA. In 2019 the contribution limit increases by $500 to a new maximum of $6,000. If you are age 50 or older you get an extra catch-up limit of $1,000. Bringing your new total contribution limit to $7,000. You need to have “earned income” to contribute to an IRA.  With married couples, if one of the spouses is not working, the other spouse who has earned income may contribute to a Spousal IRA. Each spouse can contribute the $6,000 limit to their individual account.

Just like the TSP, IRA accounts come in two flavors, ROTH and Traditional. Depending on your income (there are income limitations for ROTH), you can contribute to one type of account or a combination of both, as long as you stay under the annual contribution limit. Remember that an IRA has NOTHING to do with the TSP (or any other type of civilian employee-sponsored retirement plan). They are totally independent of each other. You can contribute your maximums to both the TSP and your own IRA. You can contribute to the ROTH TSP and contribute to a Traditional IRA, vise versa, or a mixture of both. My point being, they really have nothing to do with each other, so don’t let that confuse you.