2021 Retirement Plan Rules & Contribution Limits

For those looking to make the most of tax-advantaged retirement accounts, and able to do so, it helps to know the rules of the game. Periodically, the IRS will adjust the maximum allowed contributions and income limits for such vehicles. While not much is changed from 2020, here’s an overview of the guidelines for 2021.

401(k), 403(b), TSP, and most 457 plans (*mostly unchanged)

  • The maximum annual employee contribution remains $19,500
    • The catch-up amount for those age 50 and over also stays at $6,500
  • *If your employer allows after tax contributions to a 401(k), the total limit is increased to $58,000 (from $57,000 in 2020)
    • Note that this amount reflects a total of pretax or Roth deferrals, employer contributions, and the after-tax amounts

Overall limit for Solo 401(k) and SEP IRA (increased)

  • The most anyone can contribute to either of these plans for the year is $58,000 (from $57,000)

SIMPLE IRA (unchanged)

  • The maximum annual employee contribution stays $13,500
    • The catch-up amount also remains $3,000 for those age 50 and older

Traditional and Roth IRA (unchanged)

  • The maximum annual contribution is $6,000
    • The catch-up contribution amount is an extra $1,000 if age 50 and over

Health Savings Account (increased)

  • For individual plans, the maximum contribution increased to $3,600 (from $3,550)
  • Family plans also experience an increase to $7,200 (from $7,100)
  • Both plan types allow for an extra $1,000 if you’re 55 or older

Income limitations for deducting Traditional IRA contributions (increased)

  • If you file taxes as single or head of household and are covered by a workplace retirement plan:
    • The new phase-out range for being allowed to deduct contributions is an adjusted gross income (AGI) of $66,000 to $76,000
  • If you file as married filing jointly and the contributing spouse is covered by workplace retirement plan:
    • The phase-out range is an AGI of $105,000 to $125,000
  • If you contribute to an IRA and are not covered by workplace retirement plan, but are married to someone who is covered:
    • The phase-out range is an AGI of $198,000 to $208,000

Income limitations for contributing to a Roth IRA (increased)

  • If you file taxes as single or head of household:
    • The new phase-out range for allowable Roth contributions is an AGI of $125,000 to $140,000
  • If you file as married filing jointly:
    • The phase out range is an AGI of $198,000 to $208,000

Edward F. Jurgielewicz III

President

SMRU #: 1880781