2021 Retirement Plan Contribution Limits

The IRS has announced cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2021.

Employers offering retirement plan benefits, including a 401(k), 403(b) or 457(b) should review the updated limits every year. In the case of 401(k) plans the IRS also limits contributions for highly compensated individuals, so these plan limit changes could impact your non-discrimination testing and plan status.

Retirement plans play an important role in incentivizing saving for retirement through tax deductions. Individuals can also use these limits to determine the most tax-efficient way to save for their retirement based on if they have access to an employer plan, what their salary is and how old they are. For 2021, the maximum contribution to a 401(k) plan, either traditional or Roth, for employees under age 50 is $19,500 (same as in 2020). If you are over 50, you are eligible for a catch-up contribution of $6,500 (same as in 2020).

Download the 2021 Financial Bulletin to review contribution limit changes that may impact your company and employees.

Interested in learning more about financial wellbeing for your workforce? Check out the recent blog: How to Help Employees Save for Retirement (and Plan for the Future) Amidst a Financial Crisis.