How much money can you save for your retirement in 2020? The I.R.S. just increased the annual contribution limits on IRAs, 401(k)s, and other widely used retirement plan accounts for 2020, so we thought it would be a good idea to offer a quick look at some notable changes that you should know for 2020. In 2018, 13% of employees with retirement plans at work saved the maximum amount of $18,500-$24,500. 15% of the employees that were offered the catch-up plan over the age of 50 took advantage of that offer. The announcement by the I.R.S. means that the numbers listed can go up, and if you value your retirement, you should be a part of it!
Contribution Limit Changes In 2020
In any type of IRA in 2020, you can put up to $6,000 for your retirement. If you are older than 50 years old anytime in 2020, the limit has been increased to $7,000. Employees that participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan will face a $500 increase in the limit of contributions. In 2019, the contribution limit was $19,000, in 2020, there was a boost to $19,500. The catch-up contribution limit for participating employees over 50 years also increased by $500, from $6,000 to $6,500. (This is the first increase in the contribution limits since 2015 when the limit rose to $6,000.)
SEP IRAs and Solo 401(k)s
Are you self-employed, or do you own a small business? You may have a SEP IRA or a solo 401(k), which allows you to make both an employer and employee contribution. The limit on total SEP IRA and solo 401(k) contributions rises $1,000 in 2020, reaching $57,000. This amount is based on how much employers can contribute as a percentage of their employee’s salary. The compensation limit that is used in the savings calculation also increases in 2020 by $500. In 2019, the limit was $280,000, in 2020 however, the limit boosts to $285,000.
SIMPLE IRA Limit Changes In 2020
If you have a SIMPLE retirement account, also known as the Savings Incentive Match Plan for Employees Individual Retirement Account, limitations also have a $500 boost from 2019’s $13,000 to $13,500. But the SIMPLE catch-up plan is still the same as the 2019 limit of $3,000.
Changes in Phase-Out Ranges in 2020
Are you a single taxpayer covered by a workplace retirement plan? Your phase-out range is $65,000 to $75,000, an increase from $64,000 to $74,000.
Are you married, filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan? Your phase-out range is $104,000 to $124,000. That’s an increase from past years of $103,000 to $123,000.
If you are 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.
If you are an IRA contributor that is not covered by a workplace retirement place and is married to someone who is covered by one, the deduction is phased out if the couple’s income is between $196,000 and $206,000, an increase from $193,000 and $203,000.
For taxpayers making contributions to a Roth IRA’s income phase-out is $124,000 to $139,000 for singles and heads of households. That’s an increase from $122,000 to $137,000.
If you are a married couple filing jointly, the income phase-out range is $196,000 to $206,000, an increase from $193,000 to $203,000.
What Should I Do Now?
Planning for your retirement can be a daunting task, and you may still have some remaining questions. The Law Offices of Joel A Harris are more than prepared to provide you with legal counsel pertaining to your planning, execution, or, and any other legal concerns or questions you may have. The Law Offices of Joel A Harris, located in Concord, Walnut Creek, and Antioch are available to help you to the best of their abilities. Joel Harris is an attorney with 30 years of experience and is extremely familiar with this process. If you are not sure how to begin, or you just want some help navigating the ins and outs of protecting your retirement and estate, feel free to visit us online, in person or call us by phone at (925) 757-4605.