2020 Retirement Plan Limits

2020 Retirement Plan Limits

As part of your 2020 planning, now is the time to review funding your retirement accounts.

By establishing your contribution goals at the beginning of each year, the financial impact of saving for your future should be more manageable. Here are annual contribution limits:

Retirement Plans 2019 2020 Change Age 50 or older
catch up
IRA: Traditional $6,000 $6,000 none add: $1,000
IRA: Roth $6,000 $6,000 none add: $1,000
IRA: SIMPLE $13,000 $13,500 +$500 add: $3,000
401(k), 403(b), 457 plans $19,000 $19,500 +$500 add: $6,500

Take action

If you have not already done so, please consider:

  • Reviewing and adjusting your periodic contributions to your retirement savings accounts to take full advantage of the tax advantaged limits
  • Setting up new accounts for a spouse or dependent(s)
  • Using this time to review the status of your retirement plan
  • Reviewing contributions to other tax-advantaged plans including flexible spending accounts and health savings accounts
There’s Still Time to Fund Your IRA

There’s Still Time to Fund Your IRA

There is still time to make a contribution to a traditional IRA or Roth IRA for the 2019 tax year. The annual contribution limit is $6,000 or $7,000 if you are age 50 or over.

Prior to making a contribution, if you (or your spouse) are an active participant in an employer’s qualified retirement plan (a 401(k), for example), you will need to make sure your modified adjusted gross income (MAGI) does not exceed certain thresholds. There are also income limits to qualify to make Roth IRA contributions.

Maximum 2019 IRA Contribution amounts: $6,000 or $7,000 (with age 50+ catch-up provision)

2019 IRA Income (MAGI) Limits

Traditional IRA
allowed contribution range
Roth IRA
allowed contribution range
Filing Status Full
Contribution
Phaseout
Complete
Full
Contribution
Phaseout
Complete
Single $64,000 $74,000 $122,000 $137,000
Married $103,000
(both participating)$193,000
(nonparticipating spouse)
$123,000
(both participating)$203,000
(nonparticipating spouse)
$193,000 $203,000

Note: Married traditional IRA limits depend on whether either you, your spouse or both of you participate in a qualified employer-provided retirement plan. If married filing separate and either spouse participates in an employer’s qualified plan, the income phaseout to contribute is $0-10,000.

If your income is too high to take advantage of these IRAs you can always make a non-deductible contribution to an IRA. While the contributions are not tax-deferred, the earnings are not taxed until they are withdrawn.

2020 Social Security Benefits

2020 Social Security Benefits

Take a look at how Social Security benefits have changed. Use this infographic to help you plan for the coming year, and to learn a little more about retirement benefits and taxes.

Your 2020 Social Security Benefits
Find out how your benefits have changed

Estimated average Social Security retirement benefits starting January 2020

  • All retired workers in 2019 $1,479/mo
  • All retired workers in 2020 $1,503/mo

Did you know? You can increase your Social Security retirement benefits by 5-8% when you delay applying until you’re age 70.

1.6% cost of living adjustment for Social Security retirement benefits and SSI payments begins with the December 2019 benefits (payable in January 2020)

The 2020 maximum Social Security retirement benefits a worker retiring at full retirement age is $3,011/mo.

Did you know…

87% of Baby Boomers are expecting Social Security to be a source of their retirement income.

1-3 people expect it to be their primary source of income.

Social Security pays benefits to more than 67 million people including retirees, children and surviving spouses.

2020 Social Security and Medicare tax rates

If you work for someone else…

  • your employer pays 7.65%
  • you pay 7.65%

If you’re self-employed…

  • you pay 15.3%

Note: The above tax rates are a combination of 6.2% Social Security and 1.45% for Medicare. There is also 0.9% Medicare wages surtax for those with wages above $200,000 single ($250,000 joint filers) that is not reflected in these figures.

Maximum amount you can pay in Social Security taxes
2019: $8,239.80 2020: $8,537.40

165+ million people work and pay Social Security taxes.

Social Security has provided financial protection for Americans since 1935.

Maximum earnings amount Social Security will tax at 6.2%
2019: $132,900 2020: $137,700

How does Social Security work?

  • When you work, you pay taxes into Social Security.
  • The Social Security Administration used your tax money to pay benefits to people right now.
  • Any unused money goes to the Social Security trust funds.
  • Later on when you retire, you receive benefits.

Social Security payments explained

SS Social Security retirement benefits are for people who have “paid into” the Social Security system through taxable income.

SSD or SSDI Social Security Disability (SSD or SSDI) benefits are for people who have disabilities but have “paid into” the Social Security system through taxable income.

SSI Supplemental Security Income (SSI) benefits are for adults and children who have disabilities, plus limited income and resources.

Maximum SSI payments 2019 2020
Individual $771/mo $783/mo
Couple $1,157/mo $1,175/mo

Here’s how to qualify for your retirement benefits

When you work and pay Social Security taxes, you earn “credits” toward Social Security benefits. The number of credits you need to get retirement benefits depends on when you were born.

If you were born in 1929 or later, you need 40 credits (10 years of work) to receive Social Security retirement benefits.

The earnings needed for a credit in 2020 is $1,410.

4 credits maximum per year.

Did you know you can check your benefits status before you retire?

You can check online by creating a my Social Security account on the SSA website. If you don’t have an account, you’ll be mailed a paper Social Security statement 3 months before your 61st birthday.

It shows your year-by-year earnings, and estimates of retirement, survivors and disability benefits you and your family may be able to receive now and in the future.

If it doesn’t show earnings from a state or local government employer, contact them. The work may not have been covered either by a Section 218 agreement or by federal law.

Sources: SSA.gov, 17th Annual Retirement Survey, Transamerica Center for Retirement Studies®

Retirement Contributions Get a Boost in 2019

Retirement Contributions Get a Boost in 2019

For the first time since 2013, the IRS is raising the contributions limits for IRAs. The maximum contribution for 401(k) accounts and IRAs is increasing by $500 for 2019. If you have not already done so, now is the time to plan for contributions into your retirement accounts in 2019. Check out the tables below for the new contribution limits and Social Security increases:

Retirement Contribution Limits

Retirement Program 2019 2018 Change Age 50 or older
catch up
401(k), 403(b), 457 plans $19,000 $18,500 +$500 add: $6,000
IRA: Roth $6,000 $5,500 +$500 add: $1,000
IRA: SIMPLE $13,000 $12,500 +$500 add: $3,000
IRA: Traditional $6,000 $5,500 +$500 add: $1,000

Social Security

Item 2019 2018 Change
Wages subject to Social Security $132,900 $128,400 +$4,500 Annual Social Security
employee tax:
$8,239.80
Average estimated monthly
retirement benefit
$1,461 $1,422 +$39

Don’t forget to account for any matching programs offered by your employer as you determine your various funding levels for next year.

Keys to Creating a Satisfying Retirement

Keys to Creating a Satisfying Retirement

You’ve done your retirement homework. Your assets are reviewed, you know your financial needs, and your retirement tax plan is in place. Are you ready to enjoy retirement? Probably, but not without a plan to address what happens to many after they retire – boredom. Here are some ideas.

  • Go to school. Many colleges and communities offer classes for retired students. Pick topics of interest and take advantage of this cost-effective way to stay alert through learning. Examples could be local history classes with field trips, photography classes, writing and gardening. As an added benefit, you will meet others with your shared interest while you continue learning.
  • Pick up part-time work. Consider picking up a few hours at a local retail establishment. The work can be rewarding and provide some additional spending money.
  • Many retirees volunteer at libraries, museums and parks. Others volunteer at their local church, deliver meals and help young people with literacy. The possibilities are endless.
  • Schedule physical activity. Staying physically active will keep your body and mind in shape. Create a weekly routine that keeps you moving. Volunteer to take the grandkids to swimming lessons while the parents are working. Bike or walk to do everyday chores.
  • Look for combinations. With a little creativity, you can combine some of these ideas. For example, if you coached your kids in soccer, why not consider refereeing kids games? You might earn a little pay while staying connected with kids, and getting some physical activity.
  • Stay Connected. When you retire, many of your social connections will change. This is especially true for work connections and availability of friends that are still working. Look for other ways to make new connections. Participate in community events. Reach out through volunteer efforts to meet new people.
  • Test out your dreams. If you’ve always dreamed of moving to a new place in retirement, you may want to test-drive it first. A dream move may turn out to be different than you anticipated. You may miss your kids and friends. Services and connections you take for granted may become a problem. By renting a place and staying in the new location prior to committing, you will be prepared with a fallback plan if it does not work.

These are but a few ideas to help transition into a satisfying retirement. There are many resources to provide additional ideas.

Need to Take a Required Minimum Distribution (RMD)? April 1 Might be an Important Date for You!

Need to Take a Required Minimum Distribution (RMD)? April 1 Might be an Important Date for You!

If you reached age 70½ last year, April 1 could be an important deadline. It’s the last day you can take your required minimum distribution (RMD) for 2017 from your traditional IRAs. If you miss that deadline, the penalty may be a 50 percent excise tax on the amount you should have withdrawn.

How the rules work

Once you reach age 70½, you must start taking annual distributions from your traditional IRAs. Normally these distributions must occur by Dec. 31 of each year. But a special rule lets you defer your very first RMD until April of the year after you reach age 70½. So if you turned 70½ last year, April 1 is the deadline for your 2017 distribution. Be aware that you’ll still need to take your 2018 RMD before the end of this year. Note that RMD rules don’t apply to Roth IRAs.

Generally, the amount of the RMD for any year is based on your age. You take the balance in all your traditional IRAs as of the last day of the previous year, and divide by a factor representing your life expectancy. The IRS has published a standard life expectancy table to use in the calculation. Special rules might apply if your spouse is more than 10 years younger than you are.

RMDs and tax planning

Because all or part of your distribution may be taxable income, it is important to include RMDs in your tax planning. Ideally you should start planning for RMDs several years before you reach age 70½. But whether you’re planning in advance or looking at a distribution on April 1, contact our office for more detailed advice.

If you’re still working, this deadline may also apply to your other retirement accounts.