2020 IRS Contribution Limits
Starting in 2020 you will be able to save more for retirement than ever before.
The IRS has announced they are increasing the contribution limits for employee retirement plans such as 401(k)s to $19,500 a year, which is a $500 increase. For individuals age 50 and older, you are allowed to contribute an extra $6,500 for a total of $26,000. That featureis also increased from previous years.
Limits on personal, non-workplace retirement accounts, such as, Individual Retirement Accounts, also known as IRAs, remain at $6,000. Again, for those people 50 or older, you’re allowed to contribute an additional $1,000. There are certain income limitations you must meet to qualify which will be explained later on.
While $500 doesn’t sound like a big increase, it can make a difference. Investing $500 every single year for 30 years with a 7% average annual rate of return would grow to $47,230 in extra retirement savings.
According to a 2019 report published by the Transamerica Center for Retirement Studies, 48% of adults cited outliving my savings or investments as the number one fear in retirement. The outlook isn’t better. The vast majority believe their generation will have a much harder time achieving financial security compared to their parent’s generation.
The bottom line…take advantage of as much “tax friendly” savings accounts as possible. Start with maxing out your workplace benefits. Once you reach that limit, see if you qualify to contribute to a traditional IRA or Roth IRA. Speak to your Oppenheimer financial advisor or tax advisor for more information.
|
Summary |
2019 |
2020 |
|---|---|---|
|
401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan salary deferral limit: |
$19,000 |
$19,500 |
|
Individual Retirement Accounts (IRA) and Roth IRAs contribution limit: |
$6,000 |
$6,000 |
|
SEP IRAs and Solo 401(k)s contribution limit: |
$56,000 |
$57,000 |
|
SIMPLE IRAs salary deferral limit: |
$13,000 |
$13,500 |
|
Adjusted Gross Income IRA Qualifying Ceiling |
|
|
|
Single taxpayers covered by a workplace plan (traditional IRA tax deduction): |
Up to $74,000 |
Up to $75,000 |
|
Single and head of household taxpayer for Roth IRA contribution eligibility: |
Up to $137,000 |
Up to $139,000 |
|
Married couples filing jointly, both covered by a workplace plan (traditional IRA tax deduction): |
Up to $123,000 |
Up to $124,000 |
|
Married couples filing jointly, one spouse not covered by a workplace plan (traditional IRA tax deduction): |
Up to $203,000 |
Up to $206,000 |
|
Married couples filing jointly for Roth IRA contribution eligibility: |
Up to $203,000 |
Up to $206,000 |
© 2020 Oppenheimer & Co. Inc. Transacts Business on All Principal Exchanges and Member SIPC. The material contained in this presentation is not a substitute for consultation with a competent legal or tax advisor and should only be used in conjunction with his or her advice. Oppenheimer does not provide legal or tax advice, nor does any of its employees or affiliates. Source: IRS.gov