Updates and Changes to Retirement Account Contributions in 2020
admin • November 13, 2019
As we finish up the 2019 calendar year and head into 2020, it’s important for you to remember that you can still contribute funds into your retirement accounts to grow money tax-deferred in a Traditional IRA or 401(k), or tax-free within a Roth IRA or Roth 401(k).
- In 2019 you can contribute up to $6,000 into your IRA or Roth IRA. If over the age of 50, you can contribute up to $7,000 for the year.
- In 2019 you can contribute up to $19,000 in your employer plan (often a 401(k), 403(b), or 457 plan). If over the age of 50, you can contribute an additional $6,000 for a total of $25,000. It is important to remember this total applies only to what you are contributing and does not include what your employer is contributing or matching.
- In 2020 the contribution maximum for IRA or Roth IRA accounts will stay the same at $6,000 maximum, or up to $7,000 if over the age of 50.
- In 2020 the contribution maximum for an employer plan will increase from $19,000 to $19,500, or if over the age of 50, you will be able to contribute an additional $6,500 for a total of $26,000.
Remember, you can contribute to your IRA for the 2019 tax year through April 15, 2020, or when you file your taxes.
The IRS has also increased the phaseout of adjustable gross income taxpayers can earn to take advantage of tax-deductible IRA contributions or tax-free Roth IRA contributions. Reach out to us if you would like to learn more about the specifics of these limits.[1]
Disclosures & Citations
[1] All information in this article was found on the journalofaccountancy.com website and IRS.com website Securities and advisory services offered through Centaurus Financial, Inc. Member FINRA & SIPC, Registered Broker Dealer and a Registered Investment Advisor. Centaurus Financial Inc. and Five Pine Wealth Management are not affiliated. This is not an offer to sell securities, which may be done only after proper delivery of a prospectus and client suitability has been reviewed and determined. Information relating to securities is intended for use by individuals residing in (OR, OH, ID, CA, WA, MT, UT, NY). Centaurus Financial Inc. does not provide tax or legal advice.
The post Updates and Changes to Retirement Account Contributions in 2020 appeared first on Five Pine Wealth Management.
Join Our Newsletter
Plan smarter with our monthly financial tips + insights
Key Takeaways Having substantial wealth doesn’t automatically translate into a clear strategy for spending on travel, family, and philanthropy. A tax-aware withdrawal strategy determines how much you can direct toward discretionary spending and gifts each year without disrupting your plan. You can remove the guesswork by giving travel, family gifts, and charitable giving their own funding strategy through tools like donor-advised funds, QCDs, and structured gifting. A written, stress-tested income and withdrawal plan is how you get numbers you can act on with confidence. They call it your “golden years” for a reason. It’s the long stretch you’ve dreamt of for years: leisurely trips with your spouse, helping your kids with a down payment, and finally writing that big check for a cause you’re passionate about. You built significant wealth and have the resources and the desire to do all three. But even with a substantial portfolio, many high-net-worth retirees hesitate before spending freely — even on the things that matter most to them. Even with substantial assets, they find themselves asking, “How much can I spend in retirement? That hesitation usually has to do with the absence of a coordinated strategy that spells out how much you can direct toward discretionary spending each year and how those decisions affect your tax obligations, estate plans, and financial flexibility. Shifting From Building Wealth to Directing It For most of your career, your financial discipline revolved around growing your portfolio: maximizing contributions, managing risk, and watching the number climb. That habit served you well, but retirement introduces a shift in decision-making. Instead of allocating income toward growth, you’re directing that accumulated wealth toward your lifestyle, your family’s future, and the causes you care about. Once you retire, your measure of success changes from the size of your balance to whether your withdrawal strategy can fund your priorities and legacy goals without unnecessary tax drag or risk.
Key Takeaways Medicare surcharges (IRMAA) are based on your income from two years earlier, so a decision you make today can raise your premiums well after you've forgotten about it. A large IRA withdrawal, a Roth conversion, or selling appreciated assets can all push your income over the IRMAA thresholds, even if the bump is temporary. IRMAA works on a cliff system: crossing a threshold by even a small amount triggers the full surcharge for that tier, not a gradual increase. You open the mailbox, and there's a letter from Medicare. Your Part B premium is going up, and not just by the usual few dollars. For retirees who saved diligently and built a solid portfolio, it can feel less like a routine adjustment and more like a penalty for doing everything right. That letter is almost always about IRMAA, the Income-Related Monthly Adjustment Amount. It's one of the more confusing parts of retirement income planning, because the decision behind it could have been made two years earlier, and by the time the bill shows up, most people have already forgotten what caused it.
