Attention retirement savers! For the second year in a row, the employee contribution limit to 401(k)s, 403(b)s, and 457 plans has been raised. In 2020 you will be able to put $19,500 into your retirement plan. The amount the employer matches does not count toward this maximum. The $19,500 is all you, baby!
For those of you aged 50 and older in 2020, your catch-up contribution is also going up to $6,500/year.
This is exciting news, but nowhere nearly as exciting as in the years 1978 – 1981 where the maximum employee contribution was $45,575. Then it dropped to $30,000 from 1982 – 1986. After that we saw a nosedive to a maximum of $7,000/year. It’s been slowly creeping up ever since. *
Why those early gyrations?
We can only assume the early 401(k)s were set up to mostly benefit the highest earners. Somewhere along the line that preference got turned around to benefiting all workers. I’m guessing maximum contributions dropped accordingly.
Enough musing about the past. Back to the present and you may be dying to know if other retirement limits have gone up as well.
For the not-so-many of you using a SIMPLE IRA plan, the maximum contribution is increasing to $13,500 in 2020. Traditional IRA and Roth IRA contribution limits remain unchanged at $6,000 per year with a $1,000 catch-up for those aged 50 and older.
Now, dear readers, go forth and increase your payroll deductions!