On October 26, 2020, the IRS announced 2021 cost-of-living adjustments for annual contribution and other dollar limits affecting 401(k) and other retirement plans.  The maximum annual limit on salary deferral contributions to 401(k), 403(b), and 457 plans remained the same for 2021 as it was in 2020, at $19,500, and the catch-up contribution limit for employees age 50 and older also stayed the same at $6,500.  The SIMPLE employee contribution limit of $13,500 was also unchanged, as were the annual deductible IRA contribution and age 50 catch-up limits ($6,000 and $1,000, respectively).  The Section 415(c) dollar limit for annual additions to a retirement account was increased to $58,000 from $57,000 and the maximum limit on annual compensation under Section 401(a)(17) increased from $285,000 to $290,000.  Below we list the changed and unchanged dollar limits for 2021. Citations below are to the Internal Revenue Code. (Click on the chart for a larger image.)

In a separate announcement, the Social Security Taxable Wage Base for 2021 increased to $142,800 from the prior limit of 137,700 in 2020.

The above information is a brief summary of legal developments that is provided for general guidance only and does not create an attorney-client relationship between the author and the reader. Readers are encouraged to seek individualized legal advice in regard to any particular factual situation. (c) 2020 Christine P. Roberts, all rights reserved.

Photo Credit: Jude Beck, Unsplash

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