As the new year approaches, now is a great time to familiarize yourself with retirement contribution limits. Whether you’re contributing to a traditional, SEP IRA or Roth IRA, it’s important to know how these contribution limits could affect your retirement planning.
If you have questions or concerns about how these contribution limits apply to your particular circumstances, we recommend consulting with your tax advisor.
Traditional IRA Contribution Limits
| Under age 50 for entire calendar year | $6,000* |
| Age 50 and above at any time during calendar year | $7,000** |
Phase-out ranges for traditional IRA contribution deductibility
| Married, filing jointly and qualifying widow(er) | $104,000 – $124,000 MAGI*** |
| Married, filing separately | $0 – $10,000 MAGI**** |
| Single and head of household | $65,000 – $75,000 MAGI |
| Spousal IRA, filing jointly, IRA of nonparticipant | $196,000 – $206,000 MAGI |
An IRA owner with sufficient taxable compensation can make a fully deductible contribution, regardless of his/her MAGI, if neither he/she nor his/her spouse (if married) is an “active participant” in an employer plan. If one or both are active plan participants, the above deductibility phase-out ranges apply. Full deduction is permitted below phase-out range. Scaled partial deduction is permitted within range. No deduction is permitted above range. IRA owners not eligible for deductible contributions may make nondeductible contributions up to the annual limit. IRA owners age 70½ or older in a calendar year may not make traditional IRA contributions. These annual limits are an aggregate limit, including both Roth and traditional IRA contributions.
*Or 100% of taxable compensation, whichever is less. **Includes $1,000 catch-up contribution. *** Modified adjusted gross income. **** If married, filing separately, but live apart for the entire calendar year, then phase-out ranges for single filing status apply.
Roth IRA Contribution Limits
| Under age 50 for entire calendar year | $6,000* |
| Age 50 and above at any time during calendar year | $7,000*,** |
Phase-out ranges for Roth IRA contribution deductibility
| Married, filing jointly and qualifying widow(er) | $196,000 – $206,000 MAGI |
| Married, filing separately | $0 – $10,000 MAGI*** |
| Single and head of household | $124,000 – $139,000 MAGI |
Roth conversion income is not included in MAGI. Full contribution is permitted below phase-out range. Scaled partial contribution is permitted within range. No contribution is permitted above range. These annual limits are an aggregate limit, including both Roth and traditional IRA contributions.
*Or 100% of taxable compensation, whichever is less. **Includes $1,000 catch-up contribution. *** If married, filing separately, but live apart for entire calendar year, then phase-out ranges for single filing status apply.
Roth IRA conversions
| All filing statuses | No MAGI limit |
Defined benefit plan annual benefit limit
Generally, lesser of $230,000 or 100% of the participant’s average compensation for his/her three high consecutive years of active plan participation.
SEP IRA Contribution Limits
• Discretionary employer contributions of up to the lesser of (i) $57,000 or (ii) 25% of employee compensation or 20% of net earnings from self-employment (as determined under the SEP IRA rules).*
• A minimum of $600 in compensation may be required to participate in SEP.
* A maximum compensation cap of $285,000 per participant applies.
401(k), 403(b)*, 457(b)**, SARSEP*** Contribution Limits
Maximum salary deferral
| Under age 50 for entire calendar year | $19,500**** |
| Age 50 and above at any time during calendar year | $26,000***** |
Maximum contributions
• Maximum total contributions per employee are limited to the lesser of $57,000 or 100% of compensation, and compensation taken into account for retirement plan contributions is capped at $285,000 per employee.
• 401(k) salary deferrals and employer contributions to profit-sharing plans are aggregated for purposes of this limit; catch-up contributions do not count against this limit.
* Employees of certain organizations may be eligible to contribute greater catch-up amounts. **$6,500 catch-up contribution is not available under non-governmental 457(b) plans. Special additional catch-up contribution amounts may be available under 457(b) plans. Unless a catch-up provision applies, total employee and employer contributions to a 457(b) plan may not exceed $19,500 in 2020. *** SARSEP employee contributions (other than catch-up contributions) are limited to the lesser of $19,500 or 25% of compensation. The employer contribution limit for SEP IRAs and total contribution limit described elsewhere on this page also apply for a SARSEP. **** In Puerto Rico, the maximum 401(k) deferral for plans that are not dual-qualified is generally $15,000. ***** Includes $6,500 catch-up contribution (In Puerto Rico, the 401(k) catch-up contribution limit for plans that are not dual-qualified is generally $1,500). These Puerto Rico amounts are applicable for 2017. Once the Puerto Rican tax authorities publish the amounts applicable for 2018, this post will be updated to reflect them.
SIMPLE IRA Salary Deferral Contributions
| Under age 50 for entire calendar year | $13,500 |
| Age 50 and above at any time during calendar year | $16,500* |
* Includes $3,000 catch-up contribution.
Highly Compensated Employees
• A highly compensated employee for 2020 is a person who (1) was a 5% owner at any time during 2019 or 2020 or (2) for 2019 received more than $125,000 in compensation from the employer and, if the employer elects, also was in the “top-paid group” (top 20%) of employees for 2019.**
• Key employee – officer for top heavy testing: $185,000
* In Puerto Rico, no “top-paid” election is available. These Puerto Rico amounts are applicable for 2017. Once the Puerto Rican tax authorities publish the amounts applicable for 2018, this post will be updated to reflect them. ** For purposes of identifying a highly compensated employee for 2021, the compensation threshold is based on receiving more than $130,000 in 2020.
Saver’s Tax Credit*
Single taxpayers, qualifying widow(ers) and married individuals filing separately with MAGI at or below $32,500, heads of household with MAGI at or below $48,750 and joint filers with MAGI at or below $65,000 may be eligible for a tax credit for their contributions to certain retirement and savings arrangements including a traditional or Roth IRA, SIMPLE IRA or SARSEP, ABLE account**, elective deferrals under a 401(k), 403(b) or governmental 457(b) plan and voluntary after-tax contributions to certain
qualified retirement plans, in addition to any deduction or exclusion that would otherwise apply.
* The saver’s tax credit is only available to taxpayers who are age 18 or older and are neither full time students nor claimed as a dependent on another person’s return. ** Individual must be designated beneficiary of ABLE account.
