Clark Associates Financial Planning Inc.

JOHN P. CLARK, CFP®
146 Lakeview Drive South
Suite 301
Gibbsboro, NJ
609 567-18884
mail@clarkassociates.net
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December 17, 2019
 

Retirement Planning Key Numbers

Certain retirement plan and IRA limits are indexed for inflation each year, but only some of the limits eligible for a cost-of-living adjustment (COLA) have increased for 2021. Some of the key numbers for 2021 are listed below, with the corresponding limit for 2020. (The source for these 2021 numbers is IRS Notice 2020-79.)

 

Elective deferral limits

2020 2021
401(k) plans, 403(b) plans, 457(b) plans, and SAR-SEPs1 (includes Roth contributions) Lesser of $19,500 or 100% of participant's compensation ($26,000 if age 50 or older)2 Lesser of $19,500 or 100% of participant's compensation ($26,000 if age 50 or older)2
SIMPLE 401(k) plans and SIMPLE IRA plans1 Lesser of $13,500 or 100% of participant's compensation ($16,500 if age 50 or older) Lesser of $13,500 or 100% of participant's compensation ($16,500 if age 50 or older)
 

IRA contribution limits

2020 2021
Traditional and Roth IRAs Lesser of $6,000 or 100% of earned income ($7,000 if age 50 or older) Lesser of $6,000 or 100% of earned income ($7,000 if age 50 or older)
 

Defined benefit plan annual benefit limits

2020 2021
Annual benefit limit per participant Lesser of $230,000 or 100% of average compensation for highest three consecutive years Lesser of $230,000 or 100% of average compensation for highest three consecutive years
 

Defined contribution plan limits (qualified plans, 403(b) plans, and SEP plans)

2020 2021
Annual addition limit per participant (employer contributions; employee pre-tax, after-tax, and Roth contributions; and forfeitures) Lesser of $57,000 or 100% (25% for SEP) of participant's compensation Lesser of $58,000 or 100% (25% for SEP) of participant's compensation

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

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

Retirement plan compensation limits 2020 2021
Maximum compensation per participant that can be used to calculate tax-deductible employer contribution (qualified plans/SEPs)

$285,000

$290,000

Compensation threshold used to determine a highly compensated employee

$130,000 (when 2020 is the look-back year)

$130,000 (when 2021 is the look-back year)

Compensation threshold used to determine a key employee in a top-heavy plan

$1 for more-than-5% owners

$185,000 for officers

$150,000 for more-than-1% owners

$1 for more-than-5% owners

$185,000 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

$600

$650

 Income phaseout range for determining deductibility of traditional IRA contributions for taxpayers: 2020 2021

1. Covered by an employer-sponsored plan and filing as:

 

 

  Single/Head of household

$65,000 - $75,000

$66,000 - $76,000

  Married filing jointly

$104,000 - $124,000

$105,000 - $125,000

  Married filing separately

$0 - $10,000

$0 - $10,000

2. Not covered by an employer-sponsored retirement plan, but filing joint return with a spouse who is covered by a plan

$196,000 - $206,000

$198,000 - $208,000

Income phaseout range for determining ability to fund a Roth IRA for taxpayers filing as: 2020 2021

  Single/Head of household

$124,000 - $139,000

$125,000 - $140,000

  Married filing jointly

$196,000 - $206,000

$198,000 - $208,000

  Married filing separately

$0 - $10,000

$0 - $10,000

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Advisory Services offered through Investment Advisors, a division of ProEquities, Inc., a Registered Investment Advisor. Securities offered through ProEquities, Inc., a Registered Broker/Dealer, and member FINRA and SIPC. Clark Associates Financial Planning, Inc. is independent of ProEquities, Inc.

Your investment experience, of course, will depend on the amount you invest and when you invest. Our information neither ensures a profit nor protects against a loss, and investors should consider their willingness to keep investing when share prices are declining. Nothing in our information projects any future results. Our information is only used for a conceptual explanation and not to be construed as suggesting, implying, or inferring any future results. Any discussion of taxes and/or what is to be included or excluded as an asset or income for any type of financial disclosure including but not limited to education, nursing facilities and financial statements is neither complete nor necessarily up-to-date. The laws and regulations are complex and subject to change. For complete details, consult your accountant, tax adviser, or attorney. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity so you may lose money. Our Information may only be applicable at this time. Clark Associates is not rendering Accounting, Tax or Legal Advice.



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