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2021 Contribution Limits and Other Helpful Tips

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At the end of October, the IRS announced cost-of-living adjustments affecting contribution limits to certain retirement plans for the 2021 tax year.  As you can imagine the impact from the COVID-19 pandemic didn’t do any favors for retirement savers as most limits have stayed the same as they were in 2020. 

For those under 50 the 401(k)-contribution limit is unchanged at $19,500 and for those over 50 the limit remains at $26,000.  For IRA’s those under 50 can make $6,000 in contributions and for those over 50 the limit remains at $7,000.  Remember that contributions to IRA’s can be made up until April 15, 2022 for the 2021 tax year.

The one limit that did change was the total employer and employee contribution limit which increased $1,000 from $57,000 to $58,000.  This will help those individuals whose employers allow after tax salary deferrals and self-employed individuals with solo/individual 401(k)’s or SEP retirement accounts.  If you have an employer match feature as part of your 401(K) please review the advice from last year’s insight about getting the most out of your company match.

For those that have Health Savings Accounts (HSA’s), the contribution for a single plan increased $50 to $3,600 and for a family the contribution limit increased $100 to $7,200.  Remember that as long as distributions from HSA accounts are used for qualified medical distributions, they are tax free.

*catch up contributions are for those 50 and older

Please let us know if you have any questions related to the IRS contribution limits for retirement accounts or HSA’s.