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What's New for Retirement Savings, Social Security, and Gifting in 2019?

Every year, we report out on any changes in the amounts Americans can contribute to workplace retirement plans, invest in individual retirement accounts (IRAs), gift without tax implications, or receive in monthly social security checks.

These numbers do not always change from year to year, but several have increased in 2019. Here's a quick summary to help guide your planning for the upcoming year.

2019 Workplace Retirement Savings Limit Increases to $19,000  

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In 2019, the IRS has increased the amount you can contribute to your qualified workplace retirement plan by $500 to an annual contribution limit of $19,000. This limit applies to 401(k), 403(b), 457, and thrift savings plans. This limit does not apply to additional non-elective contributions made by employers such as matching contributions.

 The additional catch-up limit for workers age 50 or older remains the same at $6,000 for 2019.

 If you participate in a SIMPLE retirement plan, you can contribute up to $13,000 in 2019 (up from $12,500 in 2018), with an additional $3,000 if you are age 50 or older.

 2019 IRA Contribution Limit Increases to $6,000 

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The maximum contribution you can make to an individual retirement account (IRA) has increased by $500 to $6,000 in 2019 (the first increase since 2013). The catch-up contribution for savers over 50 remains the same at $1,000. These limits apply to both traditional and Roth IRAs. 

Income limits determining eligibility to contribute to a Roth IRA are increasing in 2019, as are income limits determining how much, if any, tax deductions can be taken after contributing to a traditional IRA. More details are available on the IRS website.

2019 Social Security Benefits Increase by 2.8%

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In 2019, social security recipients are receiving a 2.8% cost of living adjustment (COLA). The increase is the largest in seven years and follows a 2% increase in 2018. For the average retired worker, this translates to an estimated $39 per month stipend increase, or $468 per year. However, some workers who have their Medicare Part B premium deducted automatically from social security may see their increase absorbed by corresponding Medicare increases.

High earning workers may see a little bit more deducted from their paychecks for social security in 2019. The maximum taxable earnings cap--i.e., the point where social security tax is no longer deducted from income--has increased from $128,700 to $132,900.

 2019 Gift Tax Exclusion Limit Stays the Same at $15,000

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The annual gift tax exclusion remains flat at $15,000 in 2019. This is the amount of money or property you can give away to others throughout the year without having to file a gift tax return or pay gift tax to the IRS. 

As a side note, not all gifts count toward this limit. For example, spouses are not limited in the gifts they can give to one another. Paying school tuition or medical bills for someone else also do not trigger the gift tax--so long as payments are made directly to the service provider, not the beneficiary. 

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Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. RJFS does not provide tax advice. Please consult your tax advisor for your particular situation.

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Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Estes Wealth Strategies is not a registered broker/dealer and is independent of Raymond James Financial Services.

Any opinions in this newsletter are those of Estes Wealth Strategies and John Estes and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice.    

The information provided does not purport to be a comprehensive description of securities, markets, or other developments. This information has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information provided is not a complete summary or statement of all available data necessary for making an investment decision, nor does it constitute a recommendation.