How to maximize your 401(k) with 2020 contribution changes
The changes will reportedly help the 38 percent of people who are worried about saving enough for retirement
There are big changes coming to your retirement savings in 2020.
The Internal Revenue Service (IRS) released Notice 2019-59, disclosing how contribution limits to your 401(k) and other retirement plans are being extended significantly come Jan. 1, 2020.
The following adjustments to contribution limits are expected:
- Maximum employee contribution rises $500 – from $19,000 to $19,500
- Combined employer and employee contribution rises $1,000 to $57,000
- Employee catch-up contribution for participants ages 50+ will rises $500 to $6,500
- Combined employer and employee contribution for 50 years and older rises $1,500 to $63,500
- Annual compensation limit for calculating contributions increases $5,000 to $285,000
- Highly Compensated Employee (HCE) limit increases $5,000 to $130,000
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According to Forbes, the changes will help the 38 percent of people who are worried about saving enough for retirement.
FOX Business’ Kristina Partsinevelos reported earlier this month that the SECURE Act, passed by the Senate on Dec. 19, will also have extensive impact on access to retirement funding.
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The SECURE Act — "Setting Every Community Up for Retirement Enhancement" — adds new legislation that allows for the following to take place.
- Increases number of small businesses offering 401(k)s
- Boost benefit eligibility for part-time workers
- Increases age for required distribution to 72 years
- Penalty-free withdrawals for new parents
- Elimination of age limit for IRA contributions