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 aged 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 the lesser of $56,000 or 100% of compensation to $57,000 or 100% of compensation.
- Defined benefit plan annual limit under IRC Section 415 increased from $225,000 to $230,000.
- Compensation amount for simplified employee pension remained unchanged at $600.
- Limitation on elective deferrals for SIMPLE retirement accounts for individuals aged 50 or over increased from $13,000 to $13,500.
- SIMPLE 401(k) or SIMPLE IRA catch-up limit remained unchanged at $3,000.
Traditional and Roth IRAs
- General limits
- Limit remained unchanged at $6,000 for a traditional IRA and a Roth IRA (if eligible).
- Catch-up limit for individuals aged 50 or over remained unchanged at $1,000 for a traditional IRA and a Roth IRA (if eligible).
- Adjusted gross income phaseout ranges for a traditional IRA and a Roth IRA
- Deductibility of contributions to a traditional IRA depends on whether taxpayers are covered by a workplace retirement plan, filing status, and income.
- Phaseout of deduction is inapplicable if neither taxpayers nor their spouses are covered by a qualified retirement plan during the year.
Taxpayer filing status |
Adjusted gross income phaseout 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 by 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 phaseout ranges.
Taxpayer filing status |
Adjusted gross income phaseout 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.
Important disclosures
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.
MGTS-P41123-GE 12/19 41123 MGR120519504862
