The IRS has announced updated contribution limits for certain retirement accounts starting in 2020.
The employee contribution limit for a 401(k), 403(b) and most 457 plans will increase by $500 from $19,000 in 2019 to $19,500 for the 2020 year. If you are currently older than 50 or turning 50 in 2020, the “catch-up” employee contribution limit has also increased by $500 from $6,000 to $6,500 allowing those over 50 to contribute up to $26,000 in their 401(k), 403(b) or 457. The combined employer and employee contribution limits have been increased to $57,000 for 2020 from $56,000 in 2019.
The IRS kept the maximum traditional and Roth IRA contribution limits unchanged at $6,000. The “catch-up” contribution for those over the age of 50 will still be limited to $1,000 in additional contributions. For Simple IRAs, the maximum contribution limit increased to $13,500 from $13,000 though “catch-up” for Simple IRAs contributions remained at $3,000.
Though the Roth IRA maximum contributions have not been changed for 2020, the income limits for contributions have been increased. The phaseout for singles and heads of household occurs for annual gross income of $124,000 to $139,000. If married filing jointly, the phaseout range is $196,000 to $206,000. If AGI is exceeds these income limits, individuals or families cannot contribute to a Roth IRA.
If you would like to contribute the maximum amount, ensure that you increase any automatic payments to your 401(k), 403(b), 457 or Simple IRA for the upcoming year.