It’s that time of year again! No, not time to get your Christmas decorations out yet. It is time to start preparing for your 2020 retirement plan contributions. The IRS recently released it’s updated contribution and benefit limits for calendar year 2020 and there is good news and bad news.
Let’s start with the good news:
- 401k Elective Deferral Limits have increased by $500 to $19,500
- The catch up contribution limit was also increased by $500 to $6,500
- Those of you over 50 can now contribute up to $26,000 in 2020
- Simple IRA contribution limits also went up by $500 to $13,500
- Catch up contributions remain unchanged at $3,000
- IRA contribution limits remain unchanged: $6,000 with a $1,000 catch up contribution
- The Allowable Compensation Limit went up by $5,000 to $285,000
- This means that high earners can be matched on up to $285,000 in income inside their company retirement plans.
Now for the bad news. Luckily this list is short:
- Income subject to Social Security Tax went up $4,800 to $137,700
- This means an extra $297 in social security taxes for W2 employees, and $595 in additional taxes for sole proprietors.
If you are currently maxing out your 401k or Simple IRA make sure you take these changes into account as you begin planning for 2020. Feel free to give us a call if you would like to discuss your individual situation in more detail.