Most people on debt-free journeys aren’t thinking about retirement very often. If you follow the Dave Ramsey mindset, you don’t even begin really contributing to your retirement accounts until you’ve paid everything off. However, this week, the IRS announced some good news. The agency is increasing retirement contribution limits in 2020.
What This Means
If you are currently contributing any money to a 401(k), 403(b), or 457 plan, the amount you can contribute will increase starting January 1, 2020. It has increased from $19,000 to $19,500. Additionally, catch-up contributions will also increase from $6,000 to $6,500.
How This Can Help You
Retirement accounts are typically not taxed. By contributing the most you possibly can, it decreases the amount of your taxable income, which can help you save money as well as better prepare for your financial future. All in all, it is a great way to begin building your wealth.
It is important to keep in mind, however, that if you are currently still struggling paying off debts, it may be a good idea to hold off on retirement contributions. Instead, use the extra money to snowball your debt. After all, once you are debt-free, you will be able to throw as much money as you want towards your retirement goals.