IRS Raises Retirement Account Limits for 2020

IRS Raises Retirement Account Limits for 2020
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Retirement savers can sock away more money in multiple types of tax-sheltered retirement accounts in 2020.

The IRS announced on Nov. 6 that the contribution limits for workplace retirement plans will rise next year because of inflation. Additionally, income limits for individual retirement accounts (IRAs) will rise.

This news follows the IRS’ announcement of rising contribution limits for health savings accounts (HSAs), which also are tax-sheltered — in fact, they’re tax-free if you follow the IRS rules for them.

New contribution limit for workplace plans

In the new year, the base contribution limit for the following types of workplace retirement accounts will increase from $19,000 to $19,500:

  • 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.”

In the new year, the catch-up contribution limit for the following types of workplace retirement accounts will increase from $6,000 to $6,500:

  • 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 — in 2020.

New income limits for IRAs

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

The catch-up contribution limit for IRAs also will remain 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 will change 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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