This time of year, it is good to know about key updates for contribution levels to various types of plans. That way, you can plan for your goals and know how much more you are eligible to contribute to a specific account. The following are updates for the most common plan types.
For qualified plans such as 401(k), 403(b), 457, and SARSEP participant elective deferrals for 2020 are as follows. You can now defer up to $19,500, if eligible. This is a $500 increase over 2019. The catch-up contribution for those age 50 and over is $6,500. So, if you are age 50 or over, your maximum contribution total is $26,000. You should note that additional guidelines and rules apply for SARSEP contributions and calculations. For qualified plans, the maximum employee and employer contribution total for those under age 50 is $57,000 for 2020, or 100% of employee compensation (whichever is lower). If you are over age 50, this amount can rise to $63,500 when you add in the catch-up contribution.
For IRA participants, the contribution limits remain unchanged. You can still contribute $6,000 to your IRA or Roth IRA, and for those age 50 and over the catch-up contribution is $1,000. Remember, even though it’s possible to contribute simultaneously to a Roth IRA and a traditional IRA, if eligible, you can only contribute a combined total of $6,000 ($7,00, if over age 50). Remember also that you (or your spouse) need earned income to contribute to an IRA and that earned income level may change the amount you can contribute, or whether you can take a deduction for a traditional IRA contribution.
As with most guidelines, these limits can vary depending on your income level, tax filing status, and personal situation. The limits may vary in your personal situation so speak with your CFP® professional before implementing your final decision.
As an independent Certified Financial Planner™, I can help you focus on your finances every month. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #CFPPro #savemoney #planforretirement #FIRE