2020 Retirement Savings Accounts

2020 Retirement Savings Accounts

Are you dreaming about your retirement? It is important to save for your golden years so your golden years are golden. The IRS has increased contribution limits for various retirement savings accounts for 2020. Here are some key figures:

401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan

The 2020 contribution limit for employees who participate in these plans is $19,500 (the 2019 contribution limit was $19,000).

The catch-up contribution limit for employees aged 50 and over who participate in these plans is increased from $6,000 to $6,500.

SIMPLE IRA Plan

The 2020 contribution limit increased to $13,500 (up $500 from 2019).

The catch-up contribution limit for individuals aged 50 and over remains at $3,000.

Individual Retirement Account (IRA) Annual Contribution Limit

The 2020 limit on annual contributions to an Individual Retirement Account (Traditional or ROTH) remains at $6,000 for 2020.

The additional catch-up contribution limit for individuals aged 50 or older remains at $1,000.

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Accounts (IRAs), to contribute to Roth IRAs and to claim the Saver’s Credit all increased for 2020.

Traditional IRA – Phase –Out Ranges

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or his or her spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor his or her spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2020:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is $65,000 to $75,000, up from $64,000 to $74,000.
  • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $104,000 to $124,000, up from $103,000 to $123,000.
  • 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, up from $193,000 and $203,000.
  • For married couples filing separately, the phase-out range remains $0 to $10,000.

Roth IRA – Phase-Out Ranges

  • For single taxpayers and heads of households, the phase-out range is $124,000 to $139,000, up from $122,000 to $137,000 in 2019.
  • For married couples filing jointly, the phase-out range is $196,000 to $206,000, up from $193,000 to $203,000 in 2019.
  • 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, up from $193,000 and $203,000.
  • For married couples filing separately, the phase-out range remains $0 to $10,000. Married couples filing separately cannot make ROTH IRA contributions if modified AGI is greater than $10,000 and you lived together at any time during the year.

Colleen Minnich