SEP IRA Limit Increases in 2019
For those with money to spare, the SEP IRA contribution limit increases by $ 1,000 in 2019 from $ 55,000 to $ 56,000.
SEP IRAs are traditional retirement accounts for small business owners and employees, including self-employed freelancers. Contributions are tax deductible, and as with a traditional IRA, your investments grow excluding taxes until you withdraw funds, at which point they are taxed as income.
In the case of SEP individual pension insurance, the employer pays contributions that cannot exceed the lower of the following:
- 25 percent compensation
- $ 56,000 for 2019
This is what makes them so attractive to freelancers: if you can do it, you can save and invest significantly more than a traditional IRA, which can give you an edge in retirement (not to mention it’s easier – hence the name – set up SEP).
Downsides: There are no additional contributions for people over 50, and if you work for a small employer, you rely on them to contribute for you.
The contribution limit for individual 401 (k) s, which can only be opened by business owners without employees, has also been increased by $ 1,000 to $ 56,000 for 2019. These accounts also allow for the offsetting of the $ 6,000 premiums for business owners over 50 (the math is harder , of course).
401 (k) and regular IRA / Roth savers could also save a little more in 2019 to keep up with inflation.