2020 Contribution Limits for 401(k), IRA, Pension – IRS

2020 Contribution Limits for 401(k), IRA, Pension – IRS

Here’s your retirement plan cheat sheet for contribution limits to 401(k)s, IRAs, pensions, and more.

Defined contribution plans: The contribution limit on self-directed workplace retirement plans including 401(k)s, 403(b)s, most 457 plans, and the federal government’s Thrift Savings Plan will increase by $500 in 2020, from $19,000 to $19,500, according to the IRS.

The catch-up contribution limit for employees age 50 and over in defined contribution plans will increase from $6,000 to $6,500.

IRA plans: Individual retirement investors will not realize an increase to the savings limit next year; the limit on IRA contributions will remain at $6,000, and the catch up contribution cap will remain at $1,000.

Total DC contributions: The limit on total contributions to a defined contribution plan, including elective employee deferrals, employer matches, and non-elective deferrals, increases $1,000, to $57,000.

Cap on SIMPLE plans: The cost of living adjustment to the cap on SIMPLE workplace plans will also increase, from $13,000 to $13,500.

Income limits: The limits on income that allow households or individuals to deduct contributions to IRAs, Roth IRAs, and to qualify for the Savers Credit also all increased

–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 a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

Individuals and heads of households can contribute to a Roth IRA if their income is below a set threshold. The phase-out range will increase to $124,000 to $139,000, up from $122,000 to $137,000. For married couples filing jointly, the phase out range increases to $196,000 to $206,000, up from $193,000 to $203,000.

Defined benefit plan changes:

  • Beginning January 1, 2020, the limit on annual benefits from defined benefit plans will increase $5,000, to $230,000.
  • The annual compensation limit to determine defined benefit payments increases from $280,000 to $285,000.
  • The “key employee” dollar definition in a top-heavy plan increases from $180,000 to $185,000.
  • The dollar limit for defining a “highly compensated employee” increases from $125,000 to $130,000.
  • The level of plan assets that determine whether a collectively bargained multi-employer plan is systemically important increases $38 million, to $1.097 billion.

AGI limits for determining savers credit:

For married couples, the adjusted gross income limitation for determining the maximum retirement savings contribution credit increases $500, to $39,000.

The 50 percent credit rate drops to 20 percent at $42,500, a $1,000 increase. The 10 percent-of-contribution credit is phased out at $65,000, also up from $1,000.