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2020 Contribution limits for IRAs and 401(k)s

2020 401(k) limits, 2020 IRA contribution limits

The IRS has just announced the 2020 cost-of-living adjustments made to contribution limits and income thresholds for retirement plans. This year, cost-of-living index increases were high enough to trigger adjustments to most retirement-related IRS contribution and income amounts for 2020. The only key amounts that remain the same from 2019 are contribution limits for IRAs and catch-up contribution amounts for IRAs held by those over age 50. 

401(k)

  • 2020 contribution limits for employee 401(k) plans will increase by $500 to $19,500.
  • 2020 catch-up contribution limits for 401(k) participants aged 50 and older are increasing by $500 to $6,500.

Traditional IRAs (individual retirement account)

  • The annual contribution cap for individual retirement accounts (IRA) is unchanged from 2019 at $6,000 per eligible individual.
  • Catch-up contributions for those 50 and over remain capped at an additional $1,000 ($7,000 total contribution).
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $65,000 and $75,000.
  • For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out increases by $1,000 to a range of $104,000 to $124,000. 
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $196,000 and $206,000 (a $3,000 increase from 2019).
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

Roth IRAs

  • For married couples filing jointly, the income phase-out range for taxpayers contributing to a Roth IRA is increasing by $4,000 to an AGI of $193,000 to $203,000.
  • For singles and heads of household, the Roth IRA income phase-out range is increased by $2,000 to an AGI of $124,000 to $139,000.
  • For a married individual filing a separate return, the Roth IRA phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000

 Summary of 2020 contribution limits and income thresholds vs 2019

      2019 2020
Individual Retirement Accounts (IRAs)                                                       
IRA Contribution Limit $6,000 $6,000
IRA Catch-Up Contributions 1,000 1,000
 
IRA AGI Deduction Phase-out Starting at 
   
Joint Return $103,000 $104,000
Single or Head of Household 64,000 65,000
 
SEP
 

 
 
SEP Minimum Compensation $600 $600
SEP Maximum Contribution 56,000 57,000
SEP Maximum Compensation 280,000 285,000
 
SIMPLE Plans 
   
SIMPLE Maximum Contributions $13,000 $13,500
Catch-up Contributions 3,000 3,000
 
401(k), 403(b), Profit-Sharing Plans, etc.     
 
 
 
 
Annual Compensation $280,000 $285,000
Elective Deferrals 19,000 19,500
Catch-up Contributions 6,000 6,500
Defined Contribution Limits 56,000 57,000
ESOP Limits 1,130,000 1,150,000
 
Other
 
 
 
 
HCE Threshold $125,000 $130,000
Defined Benefit Limits 225,000 230,000
Key Employee 180,000 185,000
457 Elective Deferrals 19,000 19,500
Control Employee (board member or officer) 110,000 115,000
Control Employee (compensation-based) 225,000 230,000
Social Security Taxable Wage Limit 132,900 137,700

 

While the information provided is based on our understanding of current tax laws, and has been gathered from sources believed to be reliable, it cannot be guaranteed. Federal tax laws are complex and subject to change. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
 

Need help with your retirement plan? Visit our website or call 800-328-1935 to set up a no-cost, no-obligation financial planning session with a financial consultant with Alliant Retirement and Investment Services.


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