These Retirement Account Limits Just Increased

These Retirement Account Limits Just Increased
Photo by George Rudy / Shutterstock.com

Savers can sock away more money in multiple types of retirement accounts this year than they could in 2019.

The IRS announced recently that the contribution limits for workplace retirement and individual retirement accounts (IRAs) are higher for 2020 on account of inflation.

This news followed the IRS announcement of rising contribution limits for health savings accounts (HSAs), which are another type of tax-sheltered account. (A tax-sheltered account is one that, under federal tax laws, you can use to minimize your income taxes, assuming you’re eligible for one.)

New contribution limit for workplace plans

For 2020, the base contribution limit for the following types of workplace retirement accounts is $19,500, up from $19,000 last year:

  • 401(k) plans
  • 403(b) plans
  • Most 457 plans
  • Thrift Savings Plan

The base contribution limit for Savings Incentive Match Plan for Employees (SIMPLE) retirement accounts will increase from $13,000 to $13,500.

New catch-up limits for workplace plans

Folks who are 50 or older can save more money in their tax-sheltered retirement accounts by also making additional contributions, known as “catch-up contributions.”

For 2020, the catch-up contribution limit for the following types of workplace retirement accounts is $6,500, up from $6,000 last year.

  • 401(k)
  • 403(b)
  • Most 457 plans
  • Thrift Savings Plan

This means that someone who is at least 50 years old could contribute $19,500 plus $6,500 to those types of accounts — for a total of $26,000 — this year.

New income limits for IRAs

Although it increased for 2019, the base contribution limit for individual retirement accounts did not increase for 2020, instead remaining at $6,000.

The catch-up contribution limit for IRAs also remains the same, at $1,000. The IRS notes that this is because the catch-up limit for IRAs is not subject to an annual cost-of-living adjustment (COLA), unlike various other types of tax-sheltered retirement accounts.

Income limits for IRAs changed in 2020, however. These limits determine whether you’re eligible to make tax-deductible contributions to traditional IRAs, or to contribute whatsoever to Roth IRAs.

The income limits for both types of IRAs vary depending on your federal income tax-filing status and, of course, your income. For specifics, check out the IRS announcement.

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