The IRS Just Made It Easier to Save for Retirement

The Internal Revenue Service (IRS) has announced that under yearly inflation adjustments, it will raise the limits on 401(k) and IRA contributions for next year, reports Money . The cap on annual contributions to a traditional and Roth IRA will rise to $6,000 from $5,500, while the catch-up contribution to these accounts for those 50 and up will stay at $1,000. Employees who participate in a 401(k), 403(b), most 457 plans, and the federal Thrift Savings Plan can reserve up to $19,000 before taxes next year, up from $18,500. The new option could amount to major savings for investors in the long run, with NerdWallet's Arielle O'Shea estimating that for someone who starts contributing at 30 and retires at 67, the additional $1,000 a year adds up to an extra $134,000 in retirement savings at a 6 percent return. Consumers who cannot find the extra $1,000 to max out both accounts should compare options when choosing between contributing to a 401(k) or an IRA. A solid strategy is for workers whose employer offers a 401(k) with a company match to contribute enough to get the maximum matching dollars possible, while putting the remainder into a Roth IRA to work toward more tax-free savings for retirement.