IRS Announces Increased 2020 Contribution Limits for Retirement Plans
If you're wondering how much you can save for retirement in 2020, below is important information that you will want to read about as you prepare for the 2020 tax year.
The Treasury Department recently announced the 2020 inflation-adjusted figures for retirement account savings. While traditional IRA contributions remain the same, contributions limits are up for 401(k), SEP IRAs, and SIMPLE IRAs .
IRS Notice 2019-59 provides technical guidance, but below is a general summary:
Individual Retirement Accounts (IRAs): The annual contribution limits for IRAs remain $6,000 for 2020. The catch-up contribution allows people aged 50 or older to make additional contributions. The limit, which is not subject to inflation adjustments, also remains at $1,000 per individual.
SEP IRAs and Solo 401(k)s: For those who are self-employed and for small business owners, the amount you can save in a SEP IRA or solo 401(k) increases by $1,000, from $56,000 in 2019 to $57,000 in 2020.
The SIMPLE IRA: The SIMPLE IRAs limit increases from $13,000 in 2019 to $13,500 in 2020. The SIMPLE catch-up limit allows people aged 50 or older to make additional contributions in addition to the SIMPLE IRAs limit amount. The limit also remains at $3,000.
Traditional 401(k)s: For employees who participate in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan, the annual contribution limits have increased from $19,000 in 2019 to $19,500 in 2020. Please note that you have the ability to update your 401(k) election at any time during the year; you do not need to wait until open enrollment season.
The 401(k) Catch-Up: For employees age 50 or older, the catch-up contribution limit is $6,500 for the year 2020. This is the first increase since 2015.
Defined Benefit Plans: The annual benefit limit for defined benefit plans has increased from $225,000 in 2019 to $230,000 in 2020.
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For assistance developing a comprehensive estate plan or nursing home asset protection plan in Pennsylvania, please contact Douglas L. Kaune, Esquire at (610) 933–8069 or email him at [email protected]. Doug’s entire practice is focused on elder law, Medicaid application, estate planning, trust planning, estate administration and protection of clients’ assets from nursing home spending and estate and inheritance taxation. Unruh, Turner, Burke & Frees, P.C. is a full-service law firm which has three convenient office locations in Phoenixville, West Chester and Paoli, Pennsylvania. The firm primarily services clients in Chester, Montgomery, Delaware, Philadelphia, Bucks and Berks Counties, but can represent clients throughout Pennsylvania.