Americans will be able to save a bit more in some of their retirement accounts next year. The Treasury Department has announced inflation-adjusted figures for retirement account savings for 2020. Here are some of the changes to expect.
The 401(k), 403(b) and most Thrift Savings Plans deferred contribution limits are increasing to $19,500 next year, up from $19,000 in 2019. Catch up contributions are getting their first increase since 2015, rising $500 to $6,500 in 2020. You can make the additional $6,500 catch-up contribution for the year even if you don’t turn 50 until December 31, 2020. It is important to note that you can make changes to your 401(k) election at any time during the year, not just during open enrollment season.
According to the release, the maximum contribution for individual retirement accounts will remain at $6,000 for 2020. The catch-up contribution for those accounts will also remain the same at $1,000. SIMPLE plans are increasing to $13,500 next year, from $13,000 in 2019. For the self-employed and small business owners, the amount they can save in a SEP IRA or a solo 401(k) increases to $57,000 in 2020 from $56,000 in 2019.
The income limits for eligible deductions of IRA contributions has also been adjusted. The phaseout range for single account holders of traditional IRAs and heads of household who are active participants of a plan is $65,000 to $75,000. For married couples filing jointly, the phase-out range is between $104,000 and $124,000 when the spouse who makes the IRA contribution is an active participant in a qualified account or $196,000 and $206,000 for an IRA contributor who is not an active participant but is married to someone who is. For married individuals filing separately, the phase-out range for an active participant remains at $0 to $10,000.
Roth IRAs, which are funded with after-tax dollars, have separate income limits and no deductions. Married taxpayers filing jointly have a phase-out range between $196,000 and $206,000 in 2020, while singles and heads of households have a range between $124,000 and $139,000. For married individuals filing separately, the phase-out range remains at $0 to $10,000.