The Retirement Financial Center

Philippe E. Berthoud
10 Liberty Street
Danvers, MA 01923
978-777-5000
peberthoud@unitedplanners.com
www.retirementctr.com

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July 27, 2020

2020 Key Numbers
 

Retirement Planning

Employee/individual contribution limits

Elective deferral limits20242025
401(k) plans, 403(b) plans, 457(b) plans, and SAR-SEPs 1 [Includes Roth 401(k) and Roth 403(b) contributions]Lesser of $23,000 or 100% of participant's compensationLesser of $23,500 or 100% of participant's compensation
SIMPLE 401(k) plans and SIMPLE IRA plans1Lesser of $16,000 or 100% of participant's compensationLesser of $16,500 or 100% of participant's compensation
SIMPLE 401(k) plans and SIMPLE IRA plans with 25 or fewer employees (or those that elect these higher limits)1Lesser of $17,600 or 100% of participant's compensationLesser of $17,600 or 100% of participant's compensation
Starter 401(k) plans and safe-harbor 403(b) plansBetween 3% and 15% of annual compensation up to a maximum of $6,000 ($7,000 if age 50 or older)Between 3% and 15% of annual compensation up to a maximum of $6,000 ($7,000 if age 50 or older)

1 Must aggregate employee contributions to all 401(k), 403(b), SAR-SEP, and SIMPLE plans of all employers. 457(b) plan contributions are not aggregated. For SAR-SEPs, the percentage limit is 25% of compensation reduced by elective deferrals (effectively, a 20% maximum contribution).

IRA contribution limits20242025
Traditional IRAsLesser of $7,000 or 100% of earned income Lesser of $7,000 or 100% of earned income
Roth IRAsLesser of $7,000 or 100% of earned income Lesser of $7,000 or 100% of earned income
Additional "catch-up" limits (individuals age 50 or older)20242025
401(k) plans, 403(b) plans, 457(b) plans, and SAR-SEPs2$7,500 $7,500
*Catch-up limit if age 60 to 63N/A$11,250
SIMPLE 401(k) plans and SIMPLE IRA plans$3,500 ($3,850 for plans with 25 or fewer employees, or that elect this higher limit) $3,500 ($3,850 for plans with 25 or fewer employees, or that elect this higher limit)
*Catch-up limit if age 60 to 63N/A$5,250
IRAs (traditional and Roth)$1,000$1,000

2 Special catch-up limits may also apply to 403(b) and 457(b) plan participants.

Employer contribution/benefit 3 limits

Defined benefit plan limits20242025
Annual contribution limit per participantNo predetermined limit. Contributions based on amount needed to fund promised benefitsNo predetermined limit. Contributions based on amount needed to fund promised benefits.
Annual benefit limit per participantLesser of $275,000 or 100% of average compensation for highest 3 consecutive years Lesser of $280,000 or 100% of average compensation for highest 3 consecutive years
Defined contribution plan limits [qualified plans, 403(b) plans, SEP, and SIMPLE plans]20242025
Annual addition limit per participant (employer contributions; employee pre-tax, after-tax, and Roth contributions; and forfeitures) (does not apply to SIMPLE IRA plans)Lesser of $69,000 or 100% (25% for SEP) of participant's compensationLesser of $70,000 or 100% (25% for SEP) of participant's compensation
Maximum tax-deductible employer contribution [not applicable to 403(b) plans]25% of total compensation of employees covered under the plan (20% if self employed) plus any employee pre-tax and Roth contributions; 100% for SIMPLE plans 25% of total compensation of employees covered under the plan (20% if self employed) plus any employee pre-tax and Roth contributions; 100% for SIMPLE plans
Pension-linked emergency savings accounts (maximum amount attributable to employee deferrals)$2,500$2,500

3 For self-employed individuals, compensation generally means earned income. This means that, for qualified plans, deductible contributions for a self-employed individual are limited to 20% of net earnings from self-employment (net profits minus self-employment tax deduction), and special rules apply in calculating the annual additions limit.

Compensation limits/thresholds

Retirement plan compensation limits20242025
Maximum compensation per participant that can be used to calculate tax-deductible employer contribution (qualified plans and SEPs)$345,000 $350,000
Compensation threshold used to determine a highly compensated employee$155,000 (when 2024 is the look-back year)$160,000 (when 2025 is the look-back year)
Compensation threshold used to determine a key employee in a top-heavy plan$1 for more-than-5% owners, $220,000 for officers, $150,000 for more-than-1% owners$1 for more-than-5% owners, $230,000 for officers, $150,000 for more-than-1% owners
Compensation threshold used to determine a qualifying employee under a SIMPLE plan$5,000 $5,000
Compensation threshold used to determine a qualifying employee under a SEP plan$750$750
Traditional deductible IRA income limits — Income phase-out range for determining deductibility of traditional IRA contributions for taxpayers covered by an employer-sponsored plan and filing as:20242025
Single$77,000 - $87,000$79,000 - $89,000
Married filing jointly$123,000 - $143,000$126,000 - $146,000
Married filing separately$0 - $10,000 $0 - $10,000
Traditional deductible IRA income limits — Income phase-out range for determining deductibility of traditional IRA contributions for taxpayers not covered by an employer-sponsored retirement plan but filing a:20242025
Joint return with a spouse who is covered by an employer-sponsored retirement plan$230,000 - $240,000$236,000 - $246,000
Roth IRA compensation limits — Income phase-out range for determining ability to fund Roth IRA for taxpayers filing as:20242025
Single$146,000 - $161,000$150,000 - $165,000
Married filing jointly$230,000 - $240,000$236,000 - $246,000
Married filing separately$0 - $10,000 $0 - $10,000

Qualified charitable distribution

20242025
Annual amount not includible in gross income$105,000$108,000
One-time exclusion for transfer to split-interest entity$53,000$54,000
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IMPORTANT DISCLOSURES

Philippe E Berthoud and William E. Riquier offer Securities and Advisory Services through United Planners Financial Services, Member FINRA/SIPC. United Planners and The Retirement Financial Center are independent companies.

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual's personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.



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