2021 IRS Retirement Plan Limits
2020 was a year for the history books and one we will not soon forget! With the challenges of COVID-19 and much more I know many of us are looking forward to a fresh start in 2021. Every calendar year, the IRS adjusts contribution limits for retirement plans to account for inflation. This year we see some adjustments as well, and here are some of the more notable changes for 2021:
2021 Retirement Plan Limits for 401(k)/403(b)
Let’s start off with the most common plans. Unfortunately, the IRS is not allowing any additional contributions for salary deferrals. The limit remains at $19,500, the same as it was in 2020. If you are age 50 or older you also are allowed a “catch up” contribution, to encourage additional savings, which remains the same this year at $6,500 as well.
So what changed? The only adjustment was that the TOTAL limit for these plans has increased from $57,000 in 2020 to $58,000 in 2021. This amount includes employer contributions, after-tax contributions, etc. and is the absolute max that can be contributed to these plans in a given year.
2021 Retirement Plan Limits for Traditional IRAs and Roth IRAs
Just like last year, the IRS did not make any changes to the contribution limits for IRAs or Roth IRAs in 2021 either. The limit remains the same at $6,000 for the year with an additional $1,000 “catch-up” contribution available to those 50 and older. Please keep in mind IRAs and Roth IRAs have income considerations as well, which have slightly increased for 2021, so review this before making contributions.
2021 Retirement Plan Limits for HSAs
HSA savings account limits have increased again by the same amount for 2021. Family plan maximum contributions are up $100 again from 2020 to a total of $7,200 and individuals increased by another $50 to a level of $3,600 for 2021.
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2021 Retirement Plan Limits for SEP IRAs
Business owners and self-employed individuals are one of few who will be able to save a bit more this year. The maximum contribution to a SEP IRA increased to $58,000 in 2021, up from $57,000 in 2020. This maximum is subject to a percentage of income calculation as well.
2021 Retirement Plan Limits for SIMPLE IRA Plans
Those employees with a SIMPLE IRA plan (typically used in smaller groups) will also be subject to the same limits in 2021. The SIMPLE contribution remains the same at $13,500 in 2021. SIMPLE IRA participants over age 50 are also eligible to save an additional $3,000 “catch-up” contribution, which remains the same this year.
There are some slight differences in 2021 for retirement contribution limits so be sure to adjust your savings to take full advantage of your retirement accounts. Hopefully 2021 is your best year yet and we can all get back to a normal life after the challenges of 2020.
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