The start of a new year is a great time to reflect on the previous year and establish goals for the year ahead. Since many of our finances are structured on an annual timeline, like yearly contributions to a retirement account, this is a great time to put goals in place.
The more specific your goal, the more likely you are to achieve it, but below are some common financial goals to provide a starting point.
Goal: Max out your Retirement Accounts
For 2019 the annual contribution for 401(k)’s, 403(b)’s, and most 457 plans have increased to $19,000 (up from $18,500 in 2018) and Traditional and Roth IRA’s have also seen a $500 increase, raising the annual limit to $6,000 (up from $5,500 in 2018) (1). This is great news for those who are already maxing out these accounts, and for those who are trying to catch up before retirement. The more money you can sock away in pre-retirement years, the better these accounts will look when you need them.
For those that have maxing out their Traditional IRA or Roth as a goal and were already struggling to hit the limit, don’t let this $500 increase be discouraging. If you can increase your contribution to $6,000, this $500 bump will look great in your account by the time you retire! That extra $500 invested now earning a 7% annual interest turns into over $5,000 in 35 years (2). If you are able to max out your IRA consistently, you are potentially increasing your future balance by tens of thousands.