Mid-Year Check In

We’ve headed into the final “stretch run” of summer.  School will start soon, and most families will find themselves back in the routine that comes with fall.  I’m not in favor of speeding up time, it seems to fly by, but now is a good time to review your retirement plan contributions to make adjustments for the rest of 2019.  

A simple way to evaluate your retirement plan contributions is to first consider the amount you’d like to contribute.  Remember that a good benchmark for retirement should be 15% of your monthly income.  For some that may mean that you’ll need to consider the maximum amount you can contribute to each account.  If your goal is to maximize those amounts, the following chart lists the maximum an individual can contribute in 2019.  There are some stipulations, so you may not be able to contribute the full amount.  Give me a call if you have questions regarding this issue.

  Individuals Younger than 50 Individuals 50 and older
Traditonal IRA $6,000 $7,000
Roth IRA $6,000 $7,000
401(k) and 403(b) $19,000 $25,000
SIMPLE IRA $13,000 $16,000
SEP IRA $56,000 $56,000

 

To contribute the maximum allowable, subtract what you’ve already contributed to your account from the maximum for your age.  Divide the remaining amount by 5, which is the months remaining in 2019.  That will give you the monthly amount you’ll need to contribute to reach your goal.  If you’re paid twice per month, divide the monthly amount by 2 for the amount per paycheck.  

An example.  I’m a 55-year-old employee with a 401(k) plan.  I’ve contributed $1,500 per month to my 401(k) plan.  I’ve contributed $10,500 in 2019.  My maximum is $25,000, minus my $10,500 means I can contribute $14,500 for the remainder of 2019.  For the rest of the year, I could contribute $2,900 per month to reach the maximum for the year.  This is the calculation:  ($25,000 - $10,500 = $14,500.  $14,500 divided by 5 = $2,900)

Another example.  I’m a 34-year-old with a Roth IRA.  I’ve been contributing $400 per month,  so in 2019 I’ve added $2,800 to the account.  For 2019 I’m able to contribute $6,000, which means I have $3,200 left to contribute.  Over the remainder of the year, that would be $640 per month. This is the calculation:  ($6,000 - $2,800 = $3,400.  $3,400 divided by 5 = $640)

Summer isn’t over yet, so please enjoy the heat while it’s here, and don’t forget those retirement plan contributions.