The 2021 retirement plan limits have recently been announced by the IRS.<\/p>\n
These new limits are effective January 1, 2021.<\/p>\n
If you’re an employee and a retirement plan participant, be sure to contact your employer as soon as possible if you wish to change your retirement plan salary deferrals for 2021. Of course, if you\u2019re a Springwater client, we\u2019re happy to assist!<\/p>\n
If you’re an employer and either don\u2019t have a retirement plan in place or have questions about your existing one, please contact us for a complimentary tailor-made proposal and comparison with your current plan. You\u2019ll have happier, more satisfied employees while also saving money.<\/p>\n
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401(k)s, 403(b)s, etc<\/strong><\/span>. The standard contribution limit for employee salary deferrals to a qualified retirement plan \u2013 401(k), 403(b), most 457 plans, and the government\u2019s Thrift Savings Plan \u2013 are unchanged at $19,500 for 2021 (was $19,500 for 2020).<\/p>\n The \u201cCatch-up\u201d<\/strong><\/span>. The \u201ccatch-up\u201d deferral limit for these plans remains unchanged at $6,500 for 2021 (was $6,500 in 2020), so a person who is age 50 or older can defer a maximum of $26,000 in 2021 ($19,500 regular deferral plus a $6,500 catch-up).<\/p>\n Annual Defined Contribution Limit<\/strong><\/span>. The maximum \u201cannual additions\u201d limit (salary deferrals, plus profit sharing, plus forfeiture allocations, etc) to a defined contribution plan is increased to $58,000 for 2021 (was $57,000 for 2020). Note that the catch-up deferral is in addition to this, so the annual contribution limit for a person age 50 or older is $64,500.<\/p>\n SEP IRAs<\/strong><\/span>. The contribution limit for a SEP IRA in 2021 is increased to the lesser of (a) $58,000, or (b) 25% of the employee\u2019s salary (was $57,000 in 2020). [Note that a special computation is required to determine the contribution amount for self-employed individuals contributing for themselves]. The compensation limit used in the savings calculation is increased to $290,000 for 2021 (was $285,000 for 2020).<\/p>\n Solo 401(k)s<\/strong><\/span>. The contribution limit for a Solo 401(k) in 2021 is increased to the lesser of (a) $58,000, or (b) 100% of the employee\u2019s salary. Note that the catch-up deferral is in addition to this, so the annual contribution limit for a person age 50 or older is $64,500.<\/p>\n IRAs<\/strong><\/span>. The contribution limits for Traditional and Roth IRAs remains at $6,000 for 2021. The catch-up contribution for a person age 50 or older similarly remains at $1,000 in 2021, for a total of $7,000.<\/p>\n Simple IRAs<\/strong><\/span>. The contribution limit for a Simple IRA is unchanged at $13,500 for 2021 (was $13,500 in 2020). The catch-up contribution for a person age 50 or older remains at $3,000, for a total of $16,500.<\/p>\n Defined Benefit Plans<\/strong><\/span>. Finally, the limitation on the annual benefit of a \u201cdefined benefit\u201d plan is unchanged at $230,000 in 2021 (was $230,000 in 2020).<\/p>\n
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