Retirement plan contribution limits are indexed for inflation and can be adjusted in minimum increments of $500. This year inflation was low so many of the retirement plan numbers did not change or changed very little.
The contribution limits for 401k type plans will remain unchanged for the 2021 tax year. The annual contribution limits will continue to be $19,500 plus an additional $6,500 for those age 50 and older allowing those over age 50 to contribute up to $26,000 per year. Traditional IRA and ROTH IRA contributions also remain unchanged at $6,000 plus $1,000 for those age 50 and older.
Meanwhile, the income ranges for determining an individual’s eligibility to make tax deductible contributions to Traditional IRAs will increase slightly in 2021 as will the income phase out that determines a taxpayer’s eligibility to make a Roth IRA contribution.
For small business owners or self-employed individuals, SEP IRA and Solo K retirement plan limits will increase slightly from $57,000 in 2020 to $58,000 in 2021. Unlike 401k/403b/457 that are set up for the benefit of employees, contributions to SEP IRA and Solo K retirement plans can be made after the calendar year has ended up until the tax filing deadline, or even the extension deadline.