Monday - Friday
Tuesday December 10, 2019
IRA and 401(k) Contributions in 2020
On November 6, 2019, the IRS announced the 401(k) and IRA contribution limits for 2020. The IRA limit remains at $6,000 in 2020. Individuals over age 50 may make a catch-up contribution of $1,000, for a total transfer of $7,000 in 2020.
Traditional IRA contributions from pre-tax income are tax deductible. The traditional IRA has two main tax benefits – contributions are tax deductible and grow tax free. If you are covered by a qualified retirement plan at your workplace, the IRA deduction may be reduced or phased out.
The Roth IRA phaseout limits also increase in 2020.
If your employer offers both a traditional 401(k) and a Roth 401(k) plan, you may allocate your employee contribution to one or both funds. The traditional 401(k) amounts are tax deductible, but the Roth 401(k) contributions are after-tax.
Some employers choose to match the employees' 401(k) contributions. This is a good way to encourage employee participation in the 401(k) plan. The employer match is used to fund the employee’s traditional 401(k) account. The employee may still make contributions to a Roth or traditional 401(k) account up to the $19,500 or $26,000 limit.
Published November 8, 2019