Back in November of 2018 the IRS announced several changes affecting contribution limits for IRAs and other retirement plans for 2019. Those changes are now in effect for 2019 and remained for 2020. Some highlights include increased contribution limits for Individual Retirement Accounts to up to $6,000 with catch up contribution limits remaining the same at $1,000 for those 50 and older. SEP IRAs and Solo 401(k)s limits go up from $55,000 to $56,000 which is still based on the percentage of salary. Finally, SIMPLE retirement account contribution limits increase to $13,000 in 2019 with catch-up still at $3,000. More details regarding changes to IRAs and other retirement accounts can be found at the IRS website with technical guidance in IRS Notice 2018-83.
| Plan | Contribution Limits | Contributions Taxed? | Withdrawals Taxed? | Accept Rollovers? | Best For? |
|---|---|---|---|---|---|
|
Traditional IRA |
2020: $6,000 - $7,000 |
No |
Yes |
Yes |
No longer contributing, or maxed out other options |
|
SEP IRA |
25% of earnings to $56,000 |
No -deductible to employer |
Yes |
Yes |
Company must make contributions -thus attractive for sole proprietors and closely held companies |
|
SIMPLE IRA |
$12,500 -$15,500 plus employer match |
No -company match deductable to employer |
Yes |
Yes |
Companies with less than 100 employees that want employees to pay large portion of plan |
|
Roth IRA |
$6,000 - $7,000 |
Yes |
No* |
Yes* |
*Must meet eligibility -good for strong investments, and those that will have high tax rate at retirement |
|
Individual - K |
$56,000 -$62,000 |
Your Choice |
Based on Choice |
Yes |
Individuals that have their own business with no employees. Those that need accelerated contributions |
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