The tax law places limits on the dollar amount of contributions to retirement plans and IRAs. IRC Section 415 requires the limits to be adjusted annually for cost of living adjustments.
The below table shows a three-year comparison (starting in 2020) of certain retirement plan limits. Plan sponsors should be reviewing these increases annually and adjusting their systems accordingly for compliance purposes. Also, individuals who intend to max out their contributions should be reviewing these adjustments annually to ensure they are updating their deferral elections in order to achieve their retirement goals.
Please reach out to your tax adviser for any questions you might have regarding retirement accounts or cost of living adjustments.
For more on IRAs, check out this article on new changes made that expand the definition of earned income. It describes how starting in 2020, graduate and postdoctoral students can now treat taxable fellowships or grants as compensation for IRA purposes. This allows individuals under 50 to start saving earlier than they otherwise could have.
For more information on how Henry+Horne can help you with your IRA and retirement plans, check out our Wealth Management site.
Michael Guido, CPA