Will rising inflation increase 401K and Roth contribution limits for 2019?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Locked
User avatar
AtlasShrugged?
Posts: 608
Joined: Wed Jul 15, 2015 6:08 pm

Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by AtlasShrugged? » Sat Jun 16, 2018 8:06 am

Bogleheads....I am wondering the likelihood of Roth IRA contribution limits increasing to 7K (6K + 1K catchup), and 401K limits going to 25K (19K + 6K catchup) in light of rising inflation. My guess is that it will, but I think this depends on the CPI in August, right?

My other question is whether the 6K catchup for 401K - does that have the ability to rise with inflation? The only reason I ask is that the Roth catch-up of 1K annually is set by law and will not increase, as I understand it.
“If you don't know, the thing to do is not to get scared, but to learn.”

mptfan
Posts: 4714
Joined: Mon Mar 05, 2007 9:58 am

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by mptfan » Sat Jun 16, 2018 8:23 am

AtlasShrugged? wrote:
Sat Jun 16, 2018 8:06 am
Bogleheads....I am wondering the likelihood of Roth IRA contribution limits increasing to 7K (6K + 1K catchup), and 401K limits going to 25K (19K + 6K catchup) in light of rising inflation. My guess is that it will, but I think this depends on the CPI in August, right?
Right. The data will be available in September, and the IRS will announce the limits for 2019 in October.

User avatar
AtlasShrugged?
Posts: 608
Joined: Wed Jul 15, 2015 6:08 pm

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by AtlasShrugged? » Sat Jun 16, 2018 9:17 am

The data will be available in September, and the IRS will announce the limits for 2019 in October.
Yes....If I am doing the math right, the current calculation using CPI laid out in Internal Revenue Code section 219(b)(5)(C) yields a calculation of 5,900+, which I believe means the limit will go from 5,500 to 6,000. That is really what I am looking to confirm.

The wild card for me is the 401K calculation. Not sure how that one works.

The reason I am asking: In BigCorp, it is the season of raises. I need to figure out what % of income to set aside to max out my 401K. I am currently at 20%, and max out my 401K. If the limit goes up, then I have to leave my contribution alone. If the limit remains unchanged, I can lower my percent of salary contributed. Trying to plan ahead. :happy

It would be great if we had a wiki page that lays out the calculation, with a link to CPI. That might eliminate a whole class of posts (like this one).
“If you don't know, the thing to do is not to get scared, but to learn.”

Spirit Rider
Posts: 8871
Joined: Fri Mar 02, 2007 2:39 pm

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by Spirit Rider » Sat Jun 16, 2018 9:20 am

Based on projections using the just released May CPI.

The 402g limit is barely above $19K. It is unlikely inflation will lower, so it is reasonable, but not certain it will increase to $19K.

The catch-up isn't even close to $6500, so unless we become more like Venezuela it is unlikely to increase from $6K.

I will have to check on IRA projections.

User avatar
neurosphere
Posts: 2980
Joined: Sun Jan 17, 2010 1:55 pm

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by neurosphere » Sat Jun 16, 2018 9:56 am

AtlasShrugged? wrote:
Sat Jun 16, 2018 9:17 am
I need to figure out what % of income to set aside to max out my 401K. I am currently at 20%, and max out my 401K. If the limit goes up, then I have to leave my contribution alone. If the limit remains unchanged, I can lower my percent of salary contributed. Trying to plan ahead. :happy
Why do you have to change your percentage? What happens once you get to the max contribution during the year? Are your contributions stopped at $18,500 (or whatever) or does the excess go into an after-tax account?

If you get a raise but the max contribution amount does not change, it seems the only consequence will be that you max out your 401k a little earlier in the year, right?
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes".

mptfan
Posts: 4714
Joined: Mon Mar 05, 2007 9:58 am

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by mptfan » Sat Jun 16, 2018 9:58 am

AtlasShrugged? wrote:
Sat Jun 16, 2018 9:17 am
The data will be available in September, and the IRS will announce the limits for 2019 in October.
Yes....If I am doing the math right, the current calculation using CPI laid out in Internal Revenue Code section 219(b)(5)(C) yields a calculation of 5,900+, which I believe means the limit will go from 5,500 to 6,000. That is really what I am looking to confirm.
I am not an expert on this, so take what I say with a grain of salt, but I don't think a number greater than $5,900 is enough to increase the limit to $6,000...I think the calculated number has to actually be $6,000 or greater.

Spirit Rider
Posts: 8871
Joined: Fri Mar 02, 2007 2:39 pm

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by Spirit Rider » Sat Jun 16, 2018 10:49 am

mptfan wrote:
Sat Jun 16, 2018 9:58 am
AtlasShrugged? wrote:
Sat Jun 16, 2018 9:17 am
The data will be available in September, and the IRS will announce the limits for 2019 in October.
Yes....If I am doing the math right, the current calculation using CPI laid out in Internal Revenue Code section 219(b)(5)(C) yields a calculation of 5,900+, which I believe means the limit will go from 5,500 to 6,000. That is really what I am looking to confirm.
I am not an expert on this, so take what I say with a grain of salt, but I don't think a number greater than $5,900 is enough to increase the limit to $6,000...I think the calculated number has to actually be $6,000 or greater.
You are correct. Retirement plan limits are rounded down.

User avatar
Earl Lemongrab
Posts: 5629
Joined: Tue Jun 10, 2014 1:14 am

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by Earl Lemongrab » Sat Jun 16, 2018 4:00 pm

neurosphere wrote:
Sat Jun 16, 2018 9:56 am
AtlasShrugged? wrote:
Sat Jun 16, 2018 9:17 am
I need to figure out what % of income to set aside to max out my 401K. I am currently at 20%, and max out my 401K. If the limit goes up, then I have to leave my contribution alone. If the limit remains unchanged, I can lower my percent of salary contributed. Trying to plan ahead.
Why do you have to change your percentage? What happens once you get to the max contribution during the year? Are your contributions stopped at $18,500 (or whatever) or does the excess go into an after-tax account?
Depends on the plan. If the plan doesn't have true-up matching, then a participant needs to make sure that the minimum contribution for full match is made each pay period. Megacorp was that like that. However, it did have after-tax with matching, so I always put it on the full permitted amount (30% when I left) and let it switch over to after-tax.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

User avatar
neurosphere
Posts: 2980
Joined: Sun Jan 17, 2010 1:55 pm

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by neurosphere » Sat Jun 16, 2018 6:15 pm

Earl Lemongrab wrote:
Sat Jun 16, 2018 4:00 pm
neurosphere wrote:
Sat Jun 16, 2018 9:56 am
AtlasShrugged? wrote:
Sat Jun 16, 2018 9:17 am
I need to figure out what % of income to set aside to max out my 401K. I am currently at 20%, and max out my 401K. If the limit goes up, then I have to leave my contribution alone. If the limit remains unchanged, I can lower my percent of salary contributed. Trying to plan ahead.
Why do you have to change your percentage? What happens once you get to the max contribution during the year? Are your contributions stopped at $18,500 (or whatever) or does the excess go into an after-tax account?
Depends on the plan. If the plan doesn't have true-up matching, then a participant needs to make sure that the minimum contribution for full match is made each pay period. Megacorp was that like that. However, it did have after-tax with matching, so I always put it on the full permitted amount (30% when I left) and let it switch over to after-tax.
Oh right, I always forget that some don't match "early" and don't have a year-end true up. For both my wife and I, we can get the full match in the first half of the year, for example, if we max out our pre-tax or Roth 401ks by then.

NonnyGoGo
Posts: 87
Joined: Tue Feb 03, 2015 2:04 pm

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by NonnyGoGo » Wed Aug 08, 2018 4:32 pm

TFB updated the 2019 limits on his website: https://thefinancebuff.com/401k-403b-ir ... imits.html

GAAP
Posts: 604
Joined: Fri Apr 08, 2016 12:41 pm

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by GAAP » Wed Aug 08, 2018 4:44 pm

AtlasShrugged? wrote:
Sat Jun 16, 2018 9:17 am

The reason I am asking: In BigCorp, it is the season of raises. I need to figure out what % of income to set aside to max out my 401K. I am currently at 20%, and max out my 401K. If the limit goes up, then I have to leave my contribution alone. If the limit remains unchanged, I can lower my percent of salary contributed. Trying to plan ahead. :happy
My BigCorp plan provides for automatic after-tax contributions that allow you to exceed the normal limits -- might want to check if that applies to you.

Rainmaker41
Posts: 470
Joined: Tue Apr 26, 2016 11:34 am

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by Rainmaker41 » Wed Aug 08, 2018 4:52 pm

Thanks for the info. There’s another $2k / year in retirement space across 401(k)-type plans and IRAs for us MFJ households.
My username is not about money, but is my old online gaming username. I can't say that I make a great deal of money; I just hate spending it. Married the most loving woman in the world October 2017.

User avatar
LadyGeek
Site Admin
Posts: 48533
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by LadyGeek » Sun Oct 14, 2018 9:53 am

New member AMJoshua has a question which I've moved into a stand-alone thread. See: [How much should I contribute to my 401k?]
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

am
Posts: 2775
Joined: Sun Sep 30, 2007 9:55 am

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by am » Sun Oct 14, 2018 10:08 am

What do you think the max salary for matching contributions will be? I think it’s 275k this year resulting in 16.5k match at 6%. If the max goes up, it’s free money for me.

Spirit Rider
Posts: 8871
Joined: Fri Mar 02, 2007 2:39 pm

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by Spirit Rider » Sun Oct 14, 2018 10:51 am

The September CPI was released October 11th. It is locked in and the compensation limit will be $280K, the 415c limit $56K and the 402g limit $19K.

The IRS just hasn't released the official numbers. I would expect them this coming week

am
Posts: 2775
Joined: Sun Sep 30, 2007 9:55 am

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by am » Sun Oct 14, 2018 11:38 am

Spirit Rider wrote:
Sun Oct 14, 2018 10:51 am
The September CPI was released October 11th. It is locked in and the compensation limit will be $280K, the 415c limit $56K and the 402g limit $19K.

The IRS just hasn't released the official numbers. I would expect them this coming week
Yea. My match goes to 16.8k and contribution to 19k for total of 35800. Wish there was a way to get to 56k?

User avatar
Earl Lemongrab
Posts: 5629
Joined: Tue Jun 10, 2014 1:14 am

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by Earl Lemongrab » Sun Oct 14, 2018 1:52 pm

am wrote:
Sun Oct 14, 2018 11:38 am
Spirit Rider wrote:
Sun Oct 14, 2018 10:51 am
The September CPI was released October 11th. It is locked in and the compensation limit will be $280K, the 415c limit $56K and the 402g limit $19K.

The IRS just hasn't released the official numbers. I would expect them this coming week
Yea. My match goes to 16.8k and contribution to 19k for total of 35800. Wish there was a way to get to 56k?
If you haven't already, check to see if the plan allows after-tax non-Roth contributions. If they do and you can either roll to a Roth IRA or do in-plan conversion to Roth, then you can potentially get there or close. See "Mega Backdoor Roth".
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

am
Posts: 2775
Joined: Sun Sep 30, 2007 9:55 am

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by am » Sun Oct 14, 2018 2:11 pm

Earl Lemongrab wrote:
Sun Oct 14, 2018 1:52 pm
am wrote:
Sun Oct 14, 2018 11:38 am
Spirit Rider wrote:
Sun Oct 14, 2018 10:51 am
The September CPI was released October 11th. It is locked in and the compensation limit will be $280K, the 415c limit $56K and the 402g limit $19K.

The IRS just hasn't released the official numbers. I would expect them this coming week
Yea. My match goes to 16.8k and contribution to 19k for total of 35800. Wish there was a way to get to 56k?
If you haven't already, check to see if the plan allows after-tax non-Roth contributions. If they do and you can either roll to a Roth IRA or do in-plan conversion to Roth, then you can potentially get there or close. See "Mega Backdoor Roth".
No I asked. But given the low sophistication in my benefits office and even at fidelity, I wouldn’t be surprised if they’re giving me the wrong answer.

Silence Dogood
Posts: 715
Joined: Tue Feb 01, 2011 9:22 pm

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by Silence Dogood » Mon Oct 29, 2018 3:59 pm

mptfan wrote:
Sat Jun 16, 2018 8:23 am
AtlasShrugged? wrote:
Sat Jun 16, 2018 8:06 am
Bogleheads....I am wondering the likelihood of Roth IRA contribution limits increasing to 7K (6K + 1K catchup), and 401K limits going to 25K (19K + 6K catchup) in light of rising inflation. My guess is that it will, but I think this depends on the CPI in August, right?
Right. The data will be available in September, and the IRS will announce the limits for 2019 in October.
Do you know if the IRS has announced this yet?

Spirit Rider
Posts: 8871
Joined: Fri Mar 02, 2007 2:39 pm

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by Spirit Rider » Mon Oct 29, 2018 4:22 pm

No, historically it is usually released by the Friday following the CPI release.

The last time it was this late was 2009 when there was deflation.

MindTheGAAP
Posts: 272
Joined: Fri Jan 31, 2014 12:44 am

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by MindTheGAAP » Mon Oct 29, 2018 4:29 pm

If you google, this has been announced?

"401k/403b/457 contribution limit will go up by $500 from $18,500 in 2018 to $19,000 in 2019. If you are age 50 or over, the catch-up contribution limit will stay the same at $6,000 in both 2018 and 2019"

"Traditional and Roth IRA contribution limit will go up by $500 from $5,500 in 2018 to $6,000 in 2019. The age 50 catch up limit is fixed by law at $1,000 in all years. The IRA contribution limit and the 401k/403b or SIMPLE contribution limit are separate. You can contribute to both a 401k/403b/SIMPLE plan and a traditional or Roth IRA."

HSA will be $3500/7000 for 2019, up from 3450/6900
"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute" - William Feather

Spirit Rider
Posts: 8871
Joined: Fri Mar 02, 2007 2:39 pm

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by Spirit Rider » Mon Oct 29, 2018 4:39 pm

Are you sure that this is an official IRS release or just someone using the CPI released on 10/11 to calculate the numbers?

Link please?

The HSA numbers were officially released by the IRS in May. That is on a different schedule.

mervinj7
Posts: 667
Joined: Thu Mar 27, 2014 3:10 pm

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by mervinj7 » Mon Oct 29, 2018 4:44 pm

MindTheGAAP wrote:
Mon Oct 29, 2018 4:29 pm
If you google, this has been announced?

"401k/403b/457 contribution limit will go up by $500 from $18,500 in 2018 to $19,000 in 2019. If you are age 50 or over, the catch-up contribution limit will stay the same at $6,000 in both 2018 and 2019"

"Traditional and Roth IRA contribution limit will go up by $500 from $5,500 in 2018 to $6,000 in 2019. The age 50 catch up limit is fixed by law at $1,000 in all years. The IRA contribution limit and the 401k/403b or SIMPLE contribution limit are separate. You can contribute to both a 401k/403b/SIMPLE plan and a traditional or Roth IRA."

HSA will be $3500/7000 for 2019, up from 3450/6900
You should cite the source you used. If it's financebuff's post:
https://thefinancebuff.com/401k-403b-ir ... imits.html

then you should also cite the previous paragraph where he clearly says that this is his own estimate:
All the numbers below are from my own calculation using published inflation numbers so far and the same rules the IRS uses as stipulated by law. Although we don’t have the complete inflation numbers yet, due to rounding rules we can project the contribution limit for next year with high confidence.
That said, the 2019 HSA limits were officially announced back in May 2018.

MindTheGAAP
Posts: 272
Joined: Fri Jan 31, 2014 12:44 am

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by MindTheGAAP » Mon Oct 29, 2018 4:45 pm

mervinj7 wrote:
Mon Oct 29, 2018 4:44 pm
MindTheGAAP wrote:
Mon Oct 29, 2018 4:29 pm
If you google, this has been announced?

"401k/403b/457 contribution limit will go up by $500 from $18,500 in 2018 to $19,000 in 2019. If you are age 50 or over, the catch-up contribution limit will stay the same at $6,000 in both 2018 and 2019"

"Traditional and Roth IRA contribution limit will go up by $500 from $5,500 in 2018 to $6,000 in 2019. The age 50 catch up limit is fixed by law at $1,000 in all years. The IRA contribution limit and the 401k/403b or SIMPLE contribution limit are separate. You can contribute to both a 401k/403b/SIMPLE plan and a traditional or Roth IRA."

HSA will be $3500/7000 for 2019, up from 3450/6900
You should cite the source you used. If it's financebuff's post:
https://thefinancebuff.com/401k-403b-ir ... imits.html

then you should also cite the previous paragraph where he clearly says that this is his own estimate:
All the numbers below are from my own calculation using published inflation numbers so far and the same rules the IRS uses as stipulated by law. Although we don’t have the complete inflation numbers yet, due to rounding rules we can project the contribution limit for next year with high confidence.
That said, the 2019 HSA limits were officially announced back in May 2018.
My mistake then, I missed the estimate disclosure. I withdraw my confusion with a red face.
"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute" - William Feather

Silence Dogood
Posts: 715
Joined: Tue Feb 01, 2011 9:22 pm

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by Silence Dogood » Wed Oct 31, 2018 11:06 am

Spirit Rider wrote:
Mon Oct 29, 2018 4:22 pm
No, historically it is usually released by the Friday following the CPI release.

The last time it was this late was 2009 when there was deflation.
Thanks for the information.

Do you know what date it was in 2009 when it was released?

Spirit Rider
Posts: 8871
Joined: Fri Mar 02, 2007 2:39 pm

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by Spirit Rider » Wed Oct 31, 2018 11:28 am

Correction October 28th in 2010 and October 31st in 2013.

Silence Dogood
Posts: 715
Joined: Tue Feb 01, 2011 9:22 pm

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by Silence Dogood » Wed Oct 31, 2018 4:24 pm

Spirit Rider wrote:
Wed Oct 31, 2018 11:28 am
Correction October 28th in 2010 and October 31st in 2013.
Interesting.

Well, in 2013 there was a government shutdown (from 10/01/2013 to 10/17/2013) so that could explain the delay that year.

I'm not sure why there was a delay in 2010 and I'm definitely not sure why there is a delay this year.

Silence Dogood
Posts: 715
Joined: Tue Feb 01, 2011 9:22 pm

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by Silence Dogood » Thu Nov 01, 2018 1:25 pm

It's official - the IRS has announced today that the IRA contribution limit in 2019 will be $6,000.

22twain
Posts: 1551
Joined: Thu May 10, 2012 5:42 pm

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by 22twain » Thu Nov 01, 2018 11:37 pm

Another thread here:

viewtopic.php?f=10&t=262859
My investing princiPLEs do not include absolutely preserving princiPAL.

User avatar
LadyGeek
Site Admin
Posts: 48533
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Will rising inflation increase 401K and Roth contribution limits for 2019?

Post by LadyGeek » Fri Nov 02, 2018 3:08 pm

^^^ Please continue the discussion in that thread: 2019 Retirement Contribution Limits Announced

(Thread locked to redirect discussion.)
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

Locked