Starting in 2020 you’ll be able to give a little more toward your golden years. Specifically, $500 more.
The Internal Revenue Service (IRS) will allow employees in 401(k) plans to contribute up to $19,500 next year. It marks an increase in $500 from 2019’s limit and is among several changes in Notice 2019-59.
Other notable contribution limit changes:
- The limit on catch-up contributions (allowed for employees aged 50 and older) has increased to $6,500 from $6,000. These are additional contributions made to 401(k) accounts to help those nearing retirement put away more savings.
- The limit on SIMPLE retirement accounts has increased to $13,500 from $13,000. Short for Savings Incentive Match Plan for Employees, a SIMPLE IRA is simpler and less expensive to administer and has lower contribution limits for other conventional plans.
The IRS has also increased the income ranges that are allowed to deduct IRA contributions, contribute to Roth IRAs and/or claim the saver’s credit. (All are increases of $1,000-$3,000 over the previous year.)
- For single taxpayers covered by a workplace retirement plan, the new phase-out range is $65,000 to $75,000.
- For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the new phase-out range is $104,000 to $124,000.
- For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is now phased out if the couple’s income is between $196,000 and $206,000.
- 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.
Additionally, the income phase-out ranges have also been increased for Roth IRA contributions. For single filers and heads of household, the range is now $124,000-$139,000. If you’re married and filing jointly, your range is now $111,000-$137,000.
If you take advantage of the saver’s credit, there’s an increase for you as well. The saver’s credit is an incentive for lower income households to save for retirement. It’s worth up to $1,000 for single filers and $2,000 for joint filers.
The income limits for this credit are now $32,500 for single filers, $48,750 for heads of household, and $65,000 for married filing jointly. These are all slight increases from last year.
Make sure you and your employees know about these contribution limit increases. You can consult with an HR professional to help you educate your staff and ensure that your plans are in compliance.
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