(RepublicanDaily.org) – Individual retirement accounts (IRAs) and 401(k)s are key retirement fund vehicles. Most working Americans use at least one of these types of accounts to save for their golden years. On Monday, October 26, the IRS made an important announcement about their treatment of these funds in the future.
The contribution limit — the maximum amount you can put into a retirement fund in each payment period — will not increase in 2021. However, the maximum income levels at which one can make deductible contributions to both traditional and Roth IRAs are set to go up.
2021 IRA & 401k Contribution Limits
• 401k/403b/TSP/457 – $19,500
• IRA – $6,000
Age 50+ (Catch-up Contributions):
• 401k/403b/TSP/457 – $26,000
• IRA – $7,000
In other words…Absolutely zero changes from 2020 contribution limits
— The Wealth Dad (@thewealthdad) October 27, 2020
Some of the tax deductions that were traditionally available with IRA contributions will be phased out in 2021. There will also be changes to the eligibility requirements for Roth IRA contributions. For example, single individuals must now have an income of less than $125,000 if they want to contribute the maximum to a Roth IRA. This is up from $124,000 last year.
Though some had hoped for an extension of contribution limits, we won’t see that this year. However, if you’re currently using a 401(k) or IRA to save for retirement, you should be aware of the changes that have been introduced.
Copyright 2020, RepublicanDaily.org