The 2020 IRS and Social Security changes you need to know for retirement
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With the New Year comes new regulations from the IRS, which may impact your retirement plan, and the age at which you retire.
So before you ring in this new decade, take a moment to review both the changes and updates for 2020, and what’s staying the same.
2020 IRA Contribution Limits
Both traditional IRA and Roth IRA contribution limits in 2020 remain the same as 2019. That means individuals can contribute up to $6,000 (up from $5,500 in 2018), and those who are 50+ can contribute an additional $1,000 as an accelerator to catch up.
Roth IRA changes
While the contribution limits remain the same, the Roth IRA income limits have changed. The IRS raised the limits to the following:
A SEP, or Simplified Employee Pension, is an IRA for the self-employed and small business owners. It allows business owners with one or more employees, or any sole proprietor or freelancer who earns at least $600 in compensation to contribute to a SEP IRA.
A key difference is that employees cannot contribute to the account themselves. The employer does. But like a traditional IRA, money in a SEP account is not taxable until withdrawal.
The contribution limit to a SEP IRA in 2020 is now $57,000, up from $56,000 in 2019.
401(k) contribution limits
Based on the changes to Section 415 of the Internal Revenue Code, 401(k) contribution limits in 2020 have increased by $500.
Employees in 401(k), 403(b) and most 457 plans can now contribute up to $19,500 in 2020 (compared to $19,000 in 2019).
The catch-up contribution limit for those who are 50+ increased from $6,000 to $6,500.
And the limit for SIMPLE retirement accounts increased from $13,000 to $13,500 in 2020.
2020 Tax Brackets
The income limits for all federal tax brackets have been adjusted for inflation in 2020 as follows:
2020 Standard Deduction
The standard deductions increased a small amount for 2020: a $200 increase for single filers and a $400 increase for married couples filing jointly.
If you’re like most pre-retirees, you probably have questions about how some of these or other 2020 changes will affect your specific retirement plan.
We’re here to answer your questions. Get in touch with us here.