The 2020 401(k) contribution limits and how to use them

The 2020 retirement plan contribution limits from the IRS govern how much can be contributed in different types of tax-favored accounts. These limits can help guide retirement saving and tax planning for the coming year and beyond.

2020 retirement plan limits

Every fall, we look forward to the IRS updating the contribution and benefit limits for qualified and other tax-favored retirement accounts. These limits are adjusted for inflation annually, according to Section 415 of the Internal Revenue Code (IRC), and can be used in 2020 strategic planning discussions with plan sponsors and individuals.

General highlights

  • Limitation on elective deferrals for 401(k), 457, and 403(b) plans increased from $19,000 to $19,500.
  • 401(k), 457, and 403(b) plans' catch-up limit for individuals age 50 or over increased from $6,000 to $6,500.
  • Annual compensation limit increased from $280,000 to $285,000.
  • Key employee definition increased from $180,000 to $185,000.
  • Highly compensated employee limit increased from $125,000 to $130,000.
  • Defined contribution plan annual limit under IRC Section 415 increased from lesser of: $56,000 or 100% of compensation to $57,000 or 100% of compensation.
  • Defined benefit plan annual limit under IRC Section 415 is increased from $225,000 to $230,000.
  • Compensation amount for simplified employee pension remains unchanged at $600.
  • Limitation on elective deferrals for SIMPLE retirement accounts for individuals age 50 or over increased from $13,000 to $13,500.
  • SIMPLE 401(k) or SIMPLE IRA catch-up limit remains unchanged at $3,000.

Traditional and Roth IRAs

  • General limits
    • Limit remains unchanged at $6,000 for traditional IRA and a Roth IRA (if eligible).
    • Catch-up limit for individuals age 50 or over remains unchanged at $1,000 for a traditional IRA and a Roth IRA (if eligible).
  • Adjusted gross income phase-out ranges for traditional IRA and Roth IRA
    • Deductibility of contributions to a traditional IRA depend on whether the taxpayer or his or her spouse is covered by a workplace retirement plan, filing status, and income.
    • Phase out of deduction is inapplicable if neither the taxpayer nor his or her spouse is covered by a qualified retirement plan during the year.  

Taxpayer filing status

Adjusted gross income phase-out range

 

2020

2019

Single taxpayer covered by a retirement plan

$65,000—$75,000

$64,000—$74,000

Married individual filing jointly where IRA contributor is covered by a retirement plan

$104,000—$124,000

$103,000—$123,000

IRA contributor who's not covered by a qualified retirement plan and is married to someone who's covered by a retirement plan

$196,000—$206,000

$193,000—$203,000

Married individual filing a separate tax return and is covered a retirement plan

$0—$10,000

$0—$10,000

Contributions to a Roth IRA are subject to the following adjusted gross income limits and income phase-out ranges. 

Taxpayer filing status

Adjusted gross income phase-out range

 

2020

2019

Single taxpayer and head of household

$124,000—$139,000

$122,000—$137,000

Married individual filing jointly

$196,000—$206,000

$193,000—$203,000

Married individual filing a separate tax return

$0—$10,000

$0—$10,000

For further details on the pension limits for 2020, refer to IRS Notice 2019-59 posted on the IRS website.

The content of this document is for general information only and is believed to be accurate and reliable as of the posting date, but may be subject to change. John Hancock does not provide investment, tax or legal advice (unless otherwise indicated). Please consult your own independent advisor as to any investment, tax, or legal statements made here.

 

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Tami Guimelli

Tami Guimelli, 

Assistant Vice President and Assistant General Counsel

John Hancock Retirement

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