The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: haflander on September 14, 2018, 12:26:35 PM
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I'm looking forward to 2019 and wondered about whether the contribution limits will rise. I previously didn't know much about the factors that go into deciding the limits for 401k and IRAs, so it was interesting to learn. Do you agree with the estimates below? Why or why not? Or, alternatively, do you care at all or just wait until December/January to see what the limits are and adjust if necessary accordingly?
Estimates from this link:
https://thefinancebuff.com/401k-403b-ira-contribution-limits.html (https://thefinancebuff.com/401k-403b-ira-contribution-limits.html)
2018 2019
401k 18.5k 19k
Catch-up 6k 6k
T/R IRA 5.5k 6k
Catch-up 1k 1k
Similar Bogleheads thread:
https://www.bogleheads.org/forum/viewtopic.php?t=251841 (https://www.bogleheads.org/forum/viewtopic.php?t=251841)
According to the Bogleheads, Consumer Price Index data is released in September and the IRS announces these limits in October, so we won't have to wait long. However, speculation to kill time on a Friday afternoon is always fun :)
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Not knowing much detail about the algorithms they use to determine the limits, I'd say I wouldn't be surprised if they kept the 401K amounts the same as 2018. It just went from 18K to 18.5K in 2018. And looking at the last 8 years, they only ever increased 2 years in a row once. Since this is the first year at 18.5K, maybe they'll just leave it alone for 2019? Again, this doesn't ccount for CPI or inflation or anything they actually use to decide, I'm just looking at historical trends. I'd love to be wrong here, DH and I are pretty darn close to the cutoff for IRA deductions, so getting to hide away $1,500-$2,500 more in 2019 would be nice. (that includes 3 workplace sponsored retirement plans and 2 IRAs)
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I also don't know the actual calculation, but $500 is 2.7% of $18.5k, and the CPI for the preceding 12 months as of August is right at 2.7%, so I'd say if things continue the same, it's a toss up whether they increase or not. Same for the catch-up. The income cap will no doubt increase, so very high earners will see some additional matching.
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The estimates were correct. The IRS just announced them:
https://www.forbes.com/sites/ashleaebeling/2018/11/01/irs-announces-2019-retirement-plan-contribution-limits-for-401ks-and-more/#35710bcb776c
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In that case, then I agree!
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Thanks druged. Always a pleasant surprise when Random Online Guy is correct with his math and prediction. So the combo of 401k and IRA is moving up from 24 to 25, a nice round #.
I get paid twice a month, not every other week like most people. So for the every-2-weekers, the contribution to max out 19k would be 730.77 per pay period. For the twice-a-monthers like myself, 791.67 per pay period for the max. Obvi, you'd adjust this as necessary for bonuses and raises.
No 401k for me yet at work, I have to wait for until I've been here a year (mid-Feb) :( I'll be watching like a hawk to make sure I'm started on it right away. Also, no vesting period, yay! 3% match is kinda low IMO but no vesting makes it a pretty deal if you ask me. Hopefully there are good Vanguard or similar options, even though I'm not in love with the servicer, Principal Financial Group. Also need to combine old 401ks to the new one.
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Also need to combine old 401ks to the new one.
Don't do this if investment options / fees are better in the old 401k(s)
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right jaco. The problem is that I chose the old 401k funds pre-MMM. I need to compare every option in every servicer. I'm guessing that because the old 401ks were with much bigger financial companies, then I won't be bringing them to my new 401k. But, at least I could combine the old 401ks by moving them to the best fund available in the old servicers, which would give me 2 accounts instead of 3.
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Wee, $2,500 more going toward our retirement accounts: 403b, 403b, 457, Roth IRA, Roth IRA
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No word on HSA limits?
edit: here they are
https://www.discoverybenefits.com/blog/posts/2018/05/10/2019-hsa-contribution-limits-released-by-the-irs
Up $100 to $7,000 for family
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Great news, more green soldiers to shelter from the tax man. So 56k total with 401k and the backdoor roth.
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@haflander, it looks the the Finance Buff nailed re 2019 contribution limits:
https://www.forbes.com/sites/ashleaebeling/2018/11/01/irs-announces-2019-retirement-plan-contribution-limits-for-401ks-and-more/#37db9df0776c
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I was struck by the "13% of people saved the max 18k/24k" in 2017. I would have guessed higher. I get torn up if I can't save up to the extended limit with after-tax and pack out my mega back door roth.
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Should be sitting good for beating taxes in 2019: per diem: $50,960, trip home allowance: $6,000 HSA: $7,000, 401k: $19,000, employer match: $9,000, Roth for self and wife: $12,000 = approx. $96,000 in tax advantages.
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Kind of unbelievable you can shelter over 100k with 2 incomes if the employers offer backdoor and HSA. What a great country!
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When do they typically announce tax brackets for next year? Gotta update the spreadsheet.
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Typically they are all announced by late October. I'm guessing with all the upheaval in the tax code, they are too busy getting forms ready for the coming tax season, and the rest of the announcements have been delayed and will slowly trickle out.
Also, wrt 13% maxing, I was actually surprised it was so high, seems so many people have this idea ingrained from somewhere that you contribute in your 401k up to the match only.
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seems so many people have this idea ingrained from somewhere that you contribute in your 401k up to the match only.
One time when I was at the bank they asked me if I was "maxing" my 401(k), and what they meant was whether I was contributing the "maximum match" percentage.
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DS, in conversation with coirkers and family members, that seems to me to be the norm instead of the exception.
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right jaco. The problem is that I chose the old 401k funds pre-MMM. I need to compare every option in every servicer. I'm guessing that because the old 401ks were with much bigger financial companies, then I won't be bringing them to my new 401k. But, at least I could combine the old 401ks by moving them to the best fund available in the old servicers, which would give me 2 accounts instead of 3.
often, while you can keep your old 401k where it is, the old 401k may not accept any rollovers from you. If a prior 401k and your current plan have poor options, best bet is a rollover IRA, as long as you don't do any backdoor Roth IRA. If you have / have had self employment income, a solo 401k is also an excellent option though more hassle.
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DS, in conversation with coirkers and family members, that seems to me to be the norm instead of the exception.
I agree!
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DS, in conversation with coirkers and family members, that seems to me to be the norm instead of the exception.
I find this mentality all over society with many things and notice it a lot more after converting to the MMM culture. One reasons we have it so good is because there are enough people who do the normal thing so use few who step out of the norms can get out of consumer slavery. If everyone was the same, the formula would probably not work. I seem to remember reading about how no matter how high the government raises the 401k limits, very few people will max it out so the hit on the tax budget is minimal and still gives them a good talking point.
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right jaco. The problem is that I chose the old 401k funds pre-MMM. I need to compare every option in every servicer. I'm guessing that because the old 401ks were with much bigger financial companies, then I won't be bringing them to my new 401k. But, at least I could combine the old 401ks by moving them to the best fund available in the old servicers, which would give me 2 accounts instead of 3.
Or you could rollover your old 401k(s) to an IRA at Vanguard (or wherever). They don't have to remain as 401ks.
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right jaco. The problem is that I chose the old 401k funds pre-MMM. I need to compare every option in every servicer. I'm guessing that because the old 401ks were with much bigger financial companies, then I won't be bringing them to my new 401k. But, at least I could combine the old 401ks by moving them to the best fund available in the old servicers, which would give me 2 accounts instead of 3.
Or you could rollover your old 401k(s) to an IRA at Vanguard (or wherever). They don't have to remain as 401ks.
...oh. I guess I have to chalk this one up to being young and dumb and not knowing anything about retirement and taxable accounts. This whole time I've been thinking, "I'll just wait until I'm eligible for the new 401k and then figure out everything with the old accounts."
So, are there any kinds of restrictions or limitations on what you can do with old 401ks? You mentioned an IRA, is that because it's my only and/or best option? How about a regular old Vanguard taxable account (don't have one of these yet)? How about these "taxable events" or "taxable withdrawals" that I hear about? Definitely want to avoid that. The total of the two old 401ks is around 15k, if that matters. I'm well-versed in the funds that are best and recommended around here, but I'm not as clear with types of accounts, and what's the best for each situation or for me specifically right now. TIA!
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That's good news. Wife has both a 403(b) and a 457. So technically, I could defer a total of $38k of her income. I turn 50 next year, yikes! So I could defer a total of $25k of mine. That's $63,000 of tax deferred income if we were disciplined.
IRL we are currently contributing at or near $35k between the two of us.
ETA: It's a little north of $37k.
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Kind of unbelievable you can shelter over 100k with 2 incomes if the employers offer backdoor and HSA. What a great country!
If you make millions, you can shelter even more!
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...oh. I guess I have to chalk this one up to being young and dumb and not knowing anything about retirement and taxable accounts. This whole time I've been thinking, "I'll just wait until I'm eligible for the new 401k and then figure out everything with the old accounts."
So, are there any kinds of restrictions or limitations on what you can do with old 401ks? You mentioned an IRA, is that because it's my only and/or best option? How about a regular old Vanguard taxable account (don't have one of these yet)? How about these "taxable events" or "taxable withdrawals" that I hear about? Definitely want to avoid that. The total of the two old 401ks is around 15k, if that matters. I'm well-versed in the funds that are best and recommended around here, but I'm not as clear with types of accounts, and what's the best for each situation or for me specifically right now. TIA!
You wouldn't roll over to a taxable account because that would be a withdraw and subject to tax/penalty. Rollover to IRA is talked about a lot because everyone can do it and have the full market of IRA's to choose from regardless of employer sponsored plans available to the individual. You can probably get details of what your 401(k) options will be at your current employer even if you aren't allowed to join it yet to help inform your decision. Only drawback I am aware of for a Rollover IRA is that it can get in the way of future backdoor Roth contributions (useful if you exceed the income limits for tax deductible IRA contributions - I wish they'd just get rid of the Roth contribution income limits).
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Thanks robartsd. I'll try to dig up what my fund options will be in the new 401k. and then begin the process of rolling over old 401ks to a Vanguard IRA fund option. Sounds like the perfect task to distract from Monday blues.