Contributions to Retirement Accounts Increase for 2020

Pinnacle Personnel Services, LLC  |  Debbie Hatch

It’s official.  Yesterday, the Internal Revenue Service announced that retirement savings account limits have increased for 2020.
Highlights of changes for 2020
 
The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan (TSP) is increased from $19,000 to $19,500.
 
The catch-up contribution limit for employees aged 50 and over who participate in these plans is increased from $6,000 to $6,500.
 
The limitation regarding SIMPLE retirement accounts for 2020 is increased to $13,500, up from $13,000 for 2019.
 

PLAIN & SIMPLE:  Here’s what that means.

Employees under age 50 who participate in a retirement savings account at work can contribute up $19,500 next year.  Employees beginning with the year they turn 50 (they don’t “actually” have to be 50) or older can contribute up to $26,000

The limit on annual contributions to an IRA remains unchanged at $6,000. The additional catch-up contribution limit to an IRA for individuals aged 50 and over remains $1,000.  That said, if during the year either the taxpayer or his/her spouse was covered by a retirement plan at work, the amount one can put into an IRA may be reduced or phased out. Phase out ranges have changed for 2020:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is $65,000-$75,000 (an increase of $1,000 over 2019).
  • For married couples filing jointly, the range is $104,000 to $124,000 (again, an increase of $1,000).
  • For an IRA contributor who is not covered by a workplace retirement plan but who is married to someone who is covered, the deduction is phased-out if the couple’s income is between $196,000 and $206,000 (an increase of $3,000).
  • For a married individual filing separate returns, the phase-out range remains $0 – $10,000

Source documentation is Section 219(g)(3)(B)(i) of the United States Tax Code.

The adjusted gross income limitation for determining the maximum Roth IRA contribution for married taxpayers filing a joint return is increased by $3,000 to $196,000. The adjusted gross income limitation for all other taxpayers (other than married taxpayers filing separate returns) is increased by $2,000 to $124,000. The applicable dollar amount under for a married individual filing a separate return remains $0.

PLAIN & SIMPLE:  Here’s what that means:

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