Does your employer’s retirement plan allow you to make contributions from your salary?
To maximize your retirement savings, contribute as much as possible to the plan up to the 2020 allowed limits of:
- $19,500 for 401(k) or 403(b) plans
- $13,500 for SIMPLE plans
If you are 50 or older by the end of 2020, your plan may allow you to make additional (catch-up) contributions of:
- $6,500 for 401(k) or 403(b) plans
- $3,000 for SIMPLE plans
Remember, in addition to saving more for your retirement, there are other benefits of making salary deferral contributions to the plan. For example:
- you may reduce your taxable income by making pre-tax contributions;
- your employer may match your contributions to the plan (for example, your employer may contribute 50 cents for each dollar that you contribute to the plan, up to a certain amount); and
- you may qualify for the retirement savings contributions credit of up to $2,000 (up to $4,000 if filing jointly) for contributing to the plan and this credit may reduce your federal income tax liability.
If you previously decided to contribute less than the maximum allowed, you may be able to increase your contributions by completing a new salary deferral form during 2020.
Contact your employer for details about the retirement plan, including how much you can contribute from your salary, whether the employer also makes contributions on your behalf and whether you can change the amount of your contributions to the plan in 2020.