As we head into the final few months of 2019 you should take some time to review the contribution limits of your retirement accounts and determine if you can make additional contributions before the deadline for 2019. You should also take this opportunity to review your records to make sure you avoid the number one retirement account mistake.

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Contribution Limits

• For a 401(k), 403(b) or 457 your maximum contribution for 2019 is $19,000. If you are 50 or older before the end of 2019 you can contribute an additional $6,000 for a total of $25,000

• For a traditional or Roth IRA plan your maximum contribution for 2019 is $6,000. If you are 50 or older before the end of 2019 you can contribute an additional $1,000 for a total of $7,000. Remember that this limit applies to each spouse separately. A married couple both over the age of 50 can contribute a total of $14,000 to traditional or Roth IRAs for 2019.

• For a Simple IRA your maximum contribution for 2019 is $13,000. If you are 50 or older before the end of 2019 you can contribute an additional $3,000 for a total of $16,000.

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If you are not able to max out your contributions before the end of the year you can continue to contribute until April 15th, or October 15th if you file for an extension.

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The Number One Retirement Account Mistake

One of the biggest mistakes you can make with your IRA or other retirement account is to not have accurate beneficiary forms on record for your account. The beneficiary form identifies who you want to receive the funds in your account after your death. Missing or outdated beneficiary forms can create legal or tax nightmares for your family.

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 These beneficiary forms take precedence over any other legal documents such as a will or divorce agreement, which can result in your funds going to the wrong person, even when it is clear who you intended to receive the funds. In a recent U.S. Supreme Court case, William Kennedy failed to update the beneficiary form for his 401(k) following his divorce. In Kennedy’s divorce agreement with his wife, she agreed to waive her rights to his 401(k), however he never updated the beneficiary form with the account holder.  This led to an eight-year legal battle for his daughter, trying to recover the $402,000 he intended her to receive. His daughter ultimately lost when the Supreme Court unanimously decided that the outdated beneficiary form took precedence over the divorce agreement and Kennedy’s will. Had Kennedy simply taken the time to update the beneficiary forms for his 401(k), he would have saved his daughter years of hassle and guaranteed she receive the funds he intended for her. 

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Summary

The lesson here is very clear:  Whenever there is a major change in your life, make sure that you update the beneficiary forms for all your financial accounts. Major changes would include getting married, having a child, getting divorced or the death of a family member. If you have not reviewed these forms since the last time one of these events took place you should take some time before the end of the year to do so.