Important Retirement Updates for 2019

Pinnacle Personnel Services, LLC  |  Debbie Hatch

It’s that time of the year.  We are rapidly approaching the end of 2018.  I’m not one to make New Year’s resolutions but I do always set new goals and make plans.

I’m updating all of my class books and plan to work with an editor for my Finally Understand series. I have classes schedule into October already. I will be taking my children and grandchildren on a family vacation. I have goals to finish my personal estate planning and, I plan to hike the 100 Mile Wilderness this summer. How about you? Any big plans?

Speaking of 2019, here are some updates you should be aware of.

COST OF LIVING ADJUSTMENTS:
Social Security, military and CSRS annuities will be increasing by 2.8% in 2019. FERS annuities will be increasing by 2%.

POTENTIAL PAY RAISE:
While military members are slated to receive a 2.6% pay raise in 2019, any potential raise for civilians is still undecided. Congress and President Trump have until December 21 to agree to a deal on seven appropriations bills, which include funding for the Transportation, Housing and Urban Development, State, Interior, Agriculture, Treasury, Commerce, Homeland Security and Justice departments. The spending package will also mark the last chance for lawmakers to overrule the current plan for a 2019 civilian pay freeze.

NEW LOCALITY AREAS:
OPM plans to have six new locality pay areas take effect on the first day of the first pay period after 1 January 2019. This will impact about 70,000 federal general schedule (GS) employees. The new locality pay areas are:

Birmingham, Alabama
Burlington, Vermont
Corpus Christi, Texas
Omaha, Nebraska
San Antonio, Texas
Virginia Beach/Norfolk, Virginia

NEW TAX RATES:
There are still seven brackets. They are: 10%, 12%, 22%, 24%, 32%, 35% and 37% . Here’s how these rates break out.

INTEREST RATES:
The interest rate that will apply to 2019 military deposits, civilian deposits, civilian redeposits, and CSRS voluntary contributions, is 2.75%

ANNUITY PROCESSING:
OPM’s retirement claim backlog decreased in the month of November. The total retirement claim inventory at the end of last month was 19,162, down from 19,729 in October. OPM processed 8,077 claims in November. The agency says it is currently processing 67% for year to date, within 45-60 days.

SOCIAL SECURITY
The 6.2% OASDI tax will apply to a maximum of $132,900 earnings in the new year (up from $128,400 in 2018). One credit/quarter of SS coverage will equal $1,360.

The maximum an individual can earn, if collecting the FERS Supplement or Social Security under full retirement age, before any reduction applies, rises from 17,040 to $17,640 per year. In the year an individual attains full retirement age, the maximum earnings increases to $46,920.

MEDICARE
Part A tax remains at 1.45%. Individuals making over $200,000, regardless of filing status, will be required to pay an additional 0.9% Additional Medicare Tax. The deductible for the first 60 days of inpatient care will be $1,364. Days 61-90 will cost $341 and after the 90th day, the daily coinsurance amount will be $682. For beneficiaries in skilled nursing facilities, the daily coinsurance for days 21 through 100 of extended care is $170.50 in 2019.

Part B rates will increase to $135.50 per month, per person for individuals filing a single tax return less than $80,000 and married couples filing less than $170,000. If you make more then the income identified, read about your applicable rate here.

Part B deductible will be $185 with the co-pay remaining at 20%.

We anxiously await the new withdrawal options, still slated to become effective in September. For 2019, regular contributions increase to $19,000. Catch up contributions for those 50 and older, remain at $6,000.

Pay period 26 begins on December 23 and ends on January 5. It counts towards 2019’s TSP contributions. If you would like to make a change, and have it effective with Pay Period One, most payroll offices require you make the change no later than December 24. Check with your payroll office to see what applicable timeframes are.

Any residual 2018 required minimum distribution amounts will be processed on December 19. Any TSP withdrawal processed through December 27 will be reported to the IRS as income for 2018. Any withdrawals processed after the 27th will be report as income for 2019.

Lifecycle Funds are being reallocated in January. Exposure to international stocks will increase from 30% to 35% in all funds. Stock allocation (C, S, and I combines) will increase from 20% to 30% over a period of up to 10 years. L2030 – L2050 stock allocations will hold steady for a period of years before resuming their transitions from stocks to bonds.

INDIVIDUAL RETIREMENT ACCOUNTS
The limit on annual contributions to an IRA increased to $6,000 for 2019.  The additional catch-up contribution limit for individuals aged 50 and over remains $1,000.  SIMPLE 401k and SIMPLE IRA plans have a lower limit than 401k plans.  These will also go up by $500 from $12,500 in 2018 to $13,000 in 2019.

The income limit for contributing the maximum to a Roth IRA will go up by $2,000 for singles from to $122,000 in 2019. It will go up by $4,000 for married filing jointly to $193,000. You can’t contribute anything directly to a Roth IRA when your income goes above $137,000 for singles and $203,000 for married filing jointly.

Warmest wishes for whatever you celebrate at this time of the year.

Think about setting at least one financial goal for the coming year.

Put it in writing.

I’d be thrilled if you’d share your goal with me.  Keep in touch. Please don’t hesitate to let me know if you have any questions. I’m happy to help.

Debbie Hatch, CEO
Pinnacle Personnel Services

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