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Retirement Plan Contribution Limits

Retirement Plan Contribution Limits

April 23, 2021
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Welcome to the Weekly SUMmary - 04/23/2021

As promised from my last post, I'm going to share retirement plan contribution limits for the tax year 2021.

IRA Contribution limits are below:

  • Traditional - $6,000 with a potential catch up contribution of $1,000 (only allowable for those over 50)
  • Roth - $6,000 with a potential catch up contribution of $1,000. See a previous blog about Roths here: https://www.sumfsg.com/blog/what-you-must-know-about-roth-funds
  • Spousal IRA - $6,000 with potential $1,000 catch up contribution - This is the only plan in which the person whom the contributions are for does not need to have earned income. See the "Additional IRA contribution limits link below"

There are limits on the amounts you can deduct from pre-tax contributions based on earnings, depending on if you have the ability to access an employer sponsored retirement plan. See the IRS page here: https://www.irs.gov/retirement-plans/2021-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-covered-by-a-retirement-plan-at-work

Also see Roth earnings limits here: https://www.irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2021

Additional IRA contribution limits and information can be found here: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits

Employer sponsored retirement plans have higher employee contribution limits, see below:

  • SIMPLE plans - $13,500 with potential $3,000 catch up contribution
  • 403(b)*, 457* - $19,500 with potential $6,500 catch up contribution
  • 401(k) - $19,500 with potential $6,500 catch up contribution

In addition to Employee contributions, many of these plans have Employer contribution options. See below for total annual maximum contributions. If you would like to see catch up limits, see the document attached.

  • SEP IRA - $58,000
  • 403(b) - $58,000
  • 457 - $19,500
  • 401(k) - $58,000

There are a few other plans available for employers to take advantage of with their employees. See the attached document.

*Additional contributions, exceptions, or limits may apply. See attached document or the IRS website for more information related to these benefits.

Until next time, Do SUMthing smart with your money.

There is additional information related to each plan listed here. One should understand their options fully prior to deciding which to contribute to and how much. The information provided in this post is for educational purposes only and it is not investment or financial advice or a recommendation of any kind. For more information, use the resources provided or seek a professional.

If you withdraw money from a traditional IRA before age 59½, your deductible contributions and earnings will be taxed as ordinary income. You may also be subject to a 10% penalty on early withdrawals. Please discuss with your tax advisor prior to making financial decisions.

Roth IRA contributions are subject to income limitations. You may take nontaxable withdrawals before age 59½ if the Roth IRA is held for at least five years and you meet certain distribution guidelines. Otherwise, an early withdrawal before age 59 ½ may be subject to taxes and a 10 percent federal tax penalty. Please discuss with your tax advisor prior to making financial decisions.

(04/21)

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