The IRS has released the 2021 cost-of-living adjustments ("COLAs") for retirement-related provisions. Although contribution limits remained unchanged, income ranges for determining eligibility to make deductible contributions to IRAs, Roth IRAs and Saver's credit has risen.
Unchanged Contributions Limit
The employee contributions limit for the following plans remains unchanged at $19,500:
401(k),
403(b),
most 457 plans, and
the federal government's Thrift Savings Plan.
The catch-up contribution limit for employees aged 50 and over also remains unchanged at $6,500.
Roth and Traditional IRA remain at $6,000, and the additional catch-up contribution limit for individuals aged 50 and over remains at $1,000.
Similarly, the limitation regarding SIMPLE retirement accounts remains unchanged at $13,500.
Changes to IRAs and Roth IRAs Income Limit
The income ranges for contributions to traditional IRAs and o Roth IRAs have increased for 2021.
With traditional IRA, taxpayers can make deductible contributions to their traditional IRA if they meet certain conditions. However, the deduction phases out if the taxpayer or his/her spouse takes part in a retirement plan at work and whose income exceeds a certain threshold.
For single taxpayers covered by a workplace retirement plan, the 2021 phase-out range is $66,000 to $76,000.
For married couples filing jointly, when the spouse making the contribution takes part in a workplace retirement plan, the 2021 phase-out range is $105,000 to $125,000.
For an IRA contributor who is not covered by a workplace retirement plan but who is married to someone who is covered, the 2021 phase-out range is between $198,000 and $208,000.
For a married individual who is covered by a workplace plan and is filing a separate return, the phase-out range is not subject to an annual COLA and remains $0 to $10,000.
The 2021 income phase-out ranges for Roth IRA contributions are listed below:
Singles and heads of household: $125,000 to $140,000,
Married filing jointly: $198,000 to $208,000, and
Married filing separately: $0 to $10,000.
Saver’s Credit Increase
For low-income workers able to claim the Saver's credit under Code Sec. 25B, the 2021 income limit increased for:
Married filing jointly to $66,000,
Heads of household to $49,500, and
Singles and married filing separately to $33,000.
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