1. Contribution limits: IRAs
The limit on annual contributions to both a traditional IRA
and a Roth IRA remains unchanged in 2021 at $6,000, or $7,000 if 50 or older.
2. Contribution limits: Spousal IRAs
Spousal IRAs are regular Roth or traditional IRAs used by
married couples, one of whom works and contributes to an IRA that is in the
name of the non-working spouse with little or no income. These are not joint
accounts; each IRA is set up in the name of an individual spouse. For 2020 and
2021, use of the strategy allows couples who are married filing jointly to add
$12,000 to IRAs per year, or $14,000 if they are 50 or older.
3. Contribution limits: Workplace retirement plans
For employees who participate in 401(k), 403(b), most 457
plans and the federal government's Thrift Savings Plan, contribution limits
remain unchanged in 2021 at $19,500; the catch-up contribution limit for
employees 50 and older is $6,500.
4. Contribution limits: SIMPLE IRAs
The limitation regarding SIMPLE (Savings Incentive Match
Plan for Employees Individual Retirement Accounts) remains unchanged at
5. Contribution limits: Saver’s Credit
The income limit for the Saver’s Credit (aka Retirement
Savings Contributions Credit) for low- and moderate-income workers is $66,000
for married couples filing jointly, up from $65,000; $49,500 for heads of
household, up from $48,750; and $33,000 for singles and married individuals
filing separately, up from $32,500.
6. Deduction limits: Traditional IRAs
Contributions are not limited by how much the account holder
earns. However, if during the year either the taxpayer or his or her spouse was
covered by a retirement plan at work, the deduction may be phased out. The 2021
phase-out range for single taxpayers is $66,000 to $76,000, up from $65,000 to
$75,000; for married couples, $105,000 to $125,000, up from $104,000 to
$124,000. For an IRA contributor who is not covered by a workplace retirement
plan and is married to someone who is covered, the phase-out range is $198,000
and $208,000, up from $196,000 and $206,000, and for a married individual
filing a separate return who is covered by a workplace retirement plan, it is
not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
7. Income limits: Roth IRAs
People who make too much money cannot open or contribute to
a Roth IRA. The income phase-out range for taxpayers contributing to a Roth IRA
is $125,000 to $140,000 for singles and heads of household, up from $124,000 to
$139,000. For married couples filing jointly, it is $198,000 to $208,000, up
from $196,000 to $206,000. The phase-out range for a married individual filing
a separate return who makes contributions to a Roth IRA is not subject to an
annual cost-of-living adjustment and remains $0 to $10,000.
8. Extra benefits
Traditional IRA — Up to $10,000 in penalty-free withdrawals
are available to cover first-time homebuyer expenses. Qualified education and
hardship withdrawals are also available.
Roth IRA — After five years, up to $10,000 of earnings can
be withdrawn penalty free to cover first-time homebuyer expenses. Qualified
education and hardship withdrawals may be available without penalty before the
age limit and five-year waiting period.
With tax season just around the corner, Investopedia and the
Internal Revenue Service have published important information about retirement
accounts, IRAs in particular.
Click here for the