Unsplash / Vidar Nordli-Mathisen

The IRS has raised the cap on annual contributions toward retirement accounts, giving people the chance to put more money away for their golden years. Saving for retirement is important at any age, and starting in 2019, anyone with a 401(k) and IRAs will be able to contribute even more money annually.

New limits for 401(k) retirement accounts

In 2019, people can contribute a maximum amount of $19,000 of pre-tax income into a number of retirement accounts such as a 401(k). Currently, the contribution cap is set at $18,500 per year.

Participants designate a part of their paycheck before taxes to go toward their 401(k) or similar retirement account. When they withdraw funds, participants pay taxes on the amount.

Increase in contributions to traditional and Roth IRAs

Currently, the maximum allowable annual contribution to a traditional or Roth IRA is $5,500. The contributions come from after-tax income, which makes it possible for participants to withdraw the money tax-free after age 59 1/2.

The new cap for annual contributions for a traditional and Roth IRA is now at $6,000. It may not seem like much of a difference at first, but with interest applied over the long term, it translates to thousands of dollars.

Benefits of contributing to retirement accounts starting now

No matter what age or stage of life, people gain many benefits form contributing the maximum allowable amounts to various retirement accounts. By saving early, people get the advantage of allowing their money to grow over time.

It’s never too late to start saving for retirement, and the raised caps on both the 401(k) and IRAs make it even more impactful for those who want to be financially comfortable in their retirement.