2020 Retirement Saving Contribution Limits
The Internal Revenue Service (IRS) has announced its 2020 cost-of-living adjustments (COLAs) for retirement plans. While some retirement plan limitations will stay the same for 2020, many key limitations will increase next year, including the participant contribution limit.
2020 401(k) and 403(b) Contributions Limits
- Employees participating in their company sponsored 401(k) or 403(b) plan have a new contribution limit of $19,500, which is up from $19,000 in 2019.
- The contribution limit for participants over age 50 is $26,000, which includes a $6,500 catch-up limit.
- The highly compensated employee (HCE) threshold will increase by $5,000 to $130,000.
- The maximum amount that an employer can use when calculating matching contributions for employees’ 401(k) or 4013(b) accounts, called the annual compensation limit, will increase by $5,000 to $285,000.
2020 Simple 401(k) and Simple IRA Contribution Limits
- Employees participating in their company sponsored Simple 401(k) or Simple IRA have a new contribution limit of $13,500, which is up from $13,000 in 2019.
- The contribution limit for participants over age 50 is $16,500, which includes the unchanged $3,000 catch-up limit.
2020 SEP Contribution Limits
- Employees participating in their company or self-sponsored SEP IRA have a new contribution limit of $57,000, which is up from $56,000 in 2019.
- The annual compensation limit has been increased by $5,000 to $285,000.
2020 IRA and Roth Limits
- Traditional and Roth IRA contribution limits remain the same at $6,000.
- The contribution limit for participants over age 50 is $7,000, which includes the unchanged $1,000 catch-up limit.
Remember, the IRA contribution limit and the 401(k)/403(b) contribution limit are separate. You can contribute to both a 401(k)/403(b) and a traditional or Roth IRA, but it does come with tax deduction limitations.
See this chart for the full breakdown of contribution limits and deduction limits.
How We Can Help
Maximizing the amount you are able to contribute to your retirement plan is an important aspect when planning for retirement. Putting away an additional $1,000 to your 401(k) a year comes down to about $40 per paycheck and will have a huge impact on your account value down the road.
To see just how much of a difference that extra money can make, check out The $300,000 Difference Between Starting to Save at 25, 35, and 45.
Have questions about your financial well-being heading into retirement? Let us put together a free financial plan for you. Contact us todaywith questions.