How much can you save for retirement in 2021 in tax-advantaged accounts? How does $58,000 sound? The Treasury Department has announced inflation-adjusted figures for retirement account savings for 2021. The basic salary deferral amount for 401(k) and similar workplace plans remains flat at $19,500; the $6,500 catch-up amount if you’re 50 or older also remains the same; but the overall limit for these plans goes up from $57,000 to $58,000 in 2021. That helps workers whose employers allow special after-tax salary deferrals, and self-employed folks who can save to the limit in solo or individual 401(k)s or SEP retirement plans. For the rest of us, IRA contribution limits are flat. The amount you can contribute to an Individual retirement account stays the same for 2021: $6,000, with a $1,000 catch-up limit if you’re 50 or older. There’s a little good news for IRA savers. You can earn a little more and get to deduct your IRA contributions. Plus, the phase-out income limits for contributing to a Roth IRA are bumped up. And the income limits to claim the saver’s credit, an extra incentive to start and keep saving, has gone up. We outline the numbers below; see IRS Notice 2020-79 for technical guidance. For more on 2021 tax numbers: Forbes contributor Kelly Phillips Erb has all the details on 2021 tax brackets, standard deduction amounts and more.401(k)s. The annual contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan is $19,500 for 2021—for the second year in a row. Note, you can make changes to your 401(k) election at any time during the year, not just during open enrollment season when most employers send you a reminder to update your elections for the next plan year. The 401(k) Catch-Up. The catch-up contribution limit for employees age 50 or older in these plans also remains steady: it’s $6,500 for 2021. Even if you don’t turn 50 until December 31, 2021, you can make the additional $6,500 catch-up contribution for the year. SEP IRAs and Solo 401(k)s. For the self-employed and small business owners, the amount they can save in a SEP IRA or a solo 401(k) goes up from $57,000 in 2020 to $58,000 in 2021. That’s based on the amount they can contribute as an employer, as a percentage of their salary; the compensation limit used in the savings calculation also goes up from $285,000 in 2020 to $290,000 in 2021. Aftertax 401(k) contributions. If your employer allows aftertax contributions to your 401(k), you also get the advantage of the new $58,000 limit for 2021. It’s an overall cap, including your $19,500 (pretax or Roth in any combination) salary deferrals plus any employer contributions (but not catch-up contributions). The SIMPLE. The contribution limit for SIMPLE retirement accounts is unchanged at $13,500 for 2021. The SIMPLE catch-up limit is still $3,000. Defined Benefit Plans. All data is taken from the source: Article Link: #limit #newspaper #newstodaymsnbc #newstodayworld #newstodayupdate #newstodayfox #...(read more)
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