With a new year on the horizon, the IRS has released the inflation-adjusted retirement savings limits for 2021. While many of the limits remain unchanged, there are a few updated figures to take note of.
401(k)/ 403(b) Plans
- The annual contribution limit remains unchanged at $19,500. The catch-up amount of those who are over 50 also remains unchanged at $6,500.
- The income limit is increased to $290,000 in 2021.
- If your employer allows for after-tax contributions in your 401(k), that limit does increase to $58,000 in 2021.
Individual Retirement Accounts
- The limit to IRAs (pretax, Roth, or a combination) remains at $6,000. The catch-up contribution limit also remains unchanged at $1,000.
- The income phase-out amount has been increased for 2021 and now begins at $66,000 for single filers and $105,000 for joint filers.
Reminder: Your 2020 IRA contributions can be made until April 15, 2021.
- The limit to Simple plans remains unchanged at $13,500. The catch-up contribution limit also remains unchanged at $3,000.
SEP IRAs and Solo 401(k)s
- For self-employed and small business owners, the limit you can save is increased to $58,000. The compensation limit used in the savings calculation also goes up to $290,000 in 2021.
A full list of contribution limits can be found at on the IRS website.
How We Can Help
Maximizing the amount you are able to contribute to your retirement plan is an important aspect when planning for retirement. Putting away an additional $1,000 to your 401(k) a year comes down to about $40 per paycheck and will have a huge impact on your account value down the road.
To see just how much of a difference that extra money can make, check out The $300,000 Difference Between Starting to Save at 25, 35, and 45.
Have questions about your financial well-being heading into retirement? Let us put together a free financial plan for you. Contact us today with questions.