How much you can contribute to traditional or roth ira 2020

Comments

• Simon

  January 2020 edited January 2020

  Thanks, John.
  
  Inflation (Consumer Price Index) was up 2.1% in 2019 as of last November, so it's not surprising that IRA contributions would remain the same for 2020. Some years (in fact most years) I struggle to find the max to contribute anyway!
  
  IRA contribution limits last increased by $500 for tax year 2019. With inflation so low I wouldn't bank on another increase for 2021. The increase for 2019 was the first since 2013.
• hank

  January 2020 edited January 2020

  Many nearing retirement seem unaware of the IRS “Catch-up“ provisions. Appears current law allows persons over 50 who were unable to fully fund their retirement plan in prior years to make generous catch-up contributions later on in addition to the current yearly limit. I’m unclear whether it pertains to IRAs, but it appears that at least in some cases it does. My experience more than 2 decades ago (with a 403-B) may no longer be representative. But in my case the “catch-up“ came in darned handy in shoring-up earlier insufficient contributions as retirement neared.
  
  Quick search pulled up 3 reads:
  
  https://www.investopedia.com/terms/c/catchupcontribution.asp - Invesropedia / general description
  
  https://www.irs.gov/retirement-plans/401k-plan-catch-up-contribution-eligibility - IRS / 401K
  
  https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-catch-up-contributions - IRS / mentions IRAs - but I’m unsure of types and amounts.
  
  PS - I should have read John’s article first: “ The maximum amount you can contribute to a traditional IRA for 2020 is $6,000 if you're younger than age 50. Workers age 50 and older can add an extra $1,000 per year as a "catch-up" contribution, bringing the maximum IRA contribution to $7,000. You must have earnings from work to contribute to an IRA, and you can't put more into the account than you earned.”
  
  Perhaps my added emphasis may be helpful to some.
  
  
  From Simon - “Inflation (Consumer Price Index) was up 2.1% in 2019 as of last November” -
  
  While that sounds trite in the face last year’s near 30% return on the S&P, it really depends on perspective. A 2% rise in cost of living (if you believe the numbers) would look quite different following a 30% decline in equities, especially if bonds languished or fell in value. And even at 2% a year, over 5 years you’re looking at well over a 10% increase in COL. (Remember that inflation compounds in a manner similar to how interest does.)
• bee

  January 2020

  @hank I also remember doing a 15-year catch-up provision with my 403 b provider based on the following information and Link

  To qualify for the 15-years of service catch-up (if the employer’s plan includes this provision) the employee must have 15 years of service with the same eligible 403(b) employer. The limit on elective deferrals to the participant’s 403(b) account may be increased by up to $3,000 in any taxable year (lifetime employer-by-employer limit of $15,000) if the employee has at least 15 years of service with the same employer in a:
  
  public school system,hospital,home health service agency,health and welfare service agency,church, orconvention or association of churches.

  https://irs.gov/retirement-plans/403b-plan-fix-it-guide-an-employee-making-a-15-years-of-service-catch-up-contribution-doesnt-have-the-required-15-years-of-full-time-service-with-the-same-employer
• hank

  January 2020

  @bee,
• catch22

  January 2020 edited January 2020

  The spousal Roth IRA has been discussed here previous; but I'll add this again, as many remain unaware of this provision.
  From personal experience, I've helped 12 married couples discover this little known provision. Obviously, a married couple needs to have the financial resources to fund a spousal Roth IRA; but even a few hundred dollars annually makes a difference going forward. The common circumstances I encountered were: one spouse retires several years earlier than the other, or one spouse has a temporary or permanent job loss.
  
  "Generally, you need earned income to contribute to a Roth IRA. For married couples, there is an exception. You can contribute to an IRA for a non-working spouse, up to the maximum annual limit. A spousal Roth IRA isn't a joint account, but can be an effective way for couples to double their retirement savings."
  
  Aside from the IRS link below, do a broad search for spousal Roth IRA to discover more details.
  
  IRS pub. here .....read Spousal IRA section
  
  As always, remain curious,
  Catch