2021 Retirement Contribution and Income Limits

IRAs have annual contribution limits and 401k have salary deferral limits based on IRS Guidelines. Roth IRAs also have a contribution limit based on income. See below for current year limits.

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2021 IRA Contribution Limit

2021 Roth IRA Contribution Limit based on income

2021 401k salary deferral limit

ira contribution limit 2021

2021 IRA Contribution Limit

For 2021, 2020 and 2019, the total contributions you make each year to all of your traditional IRAs  and Roth IRAs can’t be more than:

  • $6,000 ($7,000 if you’re age 50 or older), or
  • If less, your taxable compensation for the year

For 2018, 2017, 2016 and 2015, the total contributions you make each year to all of your traditional IRAs and Roth IRAs can’t be more than:

  • $5,500 ($6,500 if you’re age 50 or older), or
  • If less, your taxable compensation for the year

The IRA contribution limit does not apply to:

Deducting your IRA contribution

Your traditional IRA contributions may be tax-deductible. The deduction may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels.

Roth IRA contribution limit

In addition to the general contribution limit that applies to both Roth and traditional IRAs, your Roth IRA contribution may be limited based on your filing status and income.

IRA contributions after age 70½

For 2020 and later, there is no age limit on making regular contributions to traditional or Roth IRAs.

For 2019, if you’re 70 ½ or older, you can’t make a regular contribution to a traditional IRA. However, you can still contribute to a Roth IRA and make rollover contributions to a Roth or traditional IRA regardless of your age.

Spousal IRAs

If you file a joint return, you may be able to contribute to an IRA even if you didn’t have taxable compensation as long as your spouse did. Each spouse can make a contribution up to the current limit; however, the total of your combined contributions can’t be more than the taxable compensation reported on your joint return. See the Kay Bailey Hutchison Spousal IRA Limit in Publication 590-A.

If neither spouse participated in a retirement plan at work, all of your contributions will be deductible.

Can I contribute to an IRA if I participate in a retirement plan at work?

You can contribute to a traditional or Roth IRA even if you participate in another retirement plan through your employer or business. However, you may not be able to deduct all of your traditional IRA contributions if you or your spouse participates in another retirement plan at work. Roth IRA contributions might be limited if your income exceeds a certain level.

Examples

  1. Danny, an unmarried college student earned $3,500 in 2020. Danny can contribute $3,500, the amount of his compensation, to his IRA for 2020. Danny’s grandmother can make the contribution on his behalf.
  2. John, age 42, has a traditional IRA and a Roth IRA. He can contribute a total of $6,000 to either one or both for 2020.
  3. Sarah, age 50, is married with no taxable compensation for 2020. She and her spouse, age 48, reported taxable compensation of $60,000 on their 2020 joint return. Sarah may contribute $7,000 to her IRA for 2020 ($6,000 plus an additional $1,000 contribution for age 50 and over). Her spouse may also contribute $6,000 to an IRA for 2020.

Tax on excess IRA contributions

An excess IRA contribution occurs if you:

  • Contribute more than the contribution limit.
  • Make a regular IRA contribution for 2019, or earlier, to a traditional IRA at age 70½ or older.
  • Make an improper rollover contribution to an IRA.

Excess contributions are taxed at 6% per year for each year the excess amounts remain in the IRA. The tax can’t be more than 6% of the combined value of all your IRAs as of the end of the tax year.

To avoid the 6% tax on excess contributions, you must withdraw:

  • the excess contributions from your IRA by the due date of your individual income tax return (including extensions); and
  • any income earned on the excess contribution.

See Publication 590-A for certain conditions that may allow you to avoid including withdrawals of excess contributions in your gross income.

Additional resources

Roth IRA Income Limit

2021 Roth IRA Contribution Limits based on Income

This table shows whether your contribution to a Roth IRA is affected by the amount of your modified AGI as computed for Roth IRA purpose.

If your filing status is… And your modified AGI is… Then you can contribute…
married filing jointly or qualifying widow(er)

 < $198,000

 up to the limit

 > $198,000 but < $208,000

 a reduced amount

 >  $208,000

 zero
married filing separately and you lived with your spouse at any time during the year

 < $10,000

 a reduced amount

 > $10,000

 zero
singlehead of household, or married filing separately and you did not live with your spouse at any time during the year

 < $125,000

 up to the limit

 > $125,000 but < $140,000

 a reduced amount

 > $140,000

 zero

Amount of your reduced Roth IRA contribution 

If the amount you can contribute must be reduced, figure your reduced contribution limit as follows.

  1. Start with your modified AGI.
  2. Subtract from the amount in (1):
    1. $198,000 if filing a joint return or qualifying widow(er),
    2. $-0- if married filing a separate return, and you lived with your spouse at any time during the year, or
    3. $125,000 for all other individuals.
  3. Divide the result in (2) by $15,000 ($10,000 if filing a joint return, qualifying widow(er), or married filing a separate return and you lived with your spouse at any time during the year).
  4. Multiply the maximum contribution limit (before reduction by this adjustment and before reduction for any contributions to traditional IRAs) by the result in (3).
  5. Subtract the result in (4) from the maximum contribution limit before this reduction. The result is your reduced contribution limit.

See Publication 590-A, Contributions to Individual Retirement Accounts (IRAs), for a worksheet to figure your reduced contribution.

401k deferral limit

401(k) Plans – Deferrals and matching when compensation exceeds the annual limit

Unless your plan terms provide otherwise, the salary (elective) deferral limit is applied uniformly to the compensation that the employee receives throughout the year.

Compensation and contribution limits are subject to annual cost-of-living adjustments. The annual limits are:

  • salary deferrals – $19,500 in 2020 and 2021 ($19,000 in 2019), plus $6,500 in 2020 and 2021 ($6,000 in 2015 – 2019) if the employee is age 50 or older (IRC Sections 402(g) and 414(v))
  • annual compensation – $290,000 in 2021, $285,000 in 2020, $280,000 in 2019 (IRC Section 401(a)(17))
  • total employee and employer contributions (including forfeitures) – the lesser of 100% of an employee’s compensation or $58,000 for 2021 ($57,000 for 2020 not including “catch-up” elective deferrals of $6,500 in 2020 and 2021 ($6,000 in 2015 – 2019) for employees age 50 or older) (IRC section 415(c))

Example: Mary, age 49, whose annual compensation is $360,000 ($30,000 per month), elects to defer $1,500 per calendar month, up to $19,000 for the 2019 year. Mary may contribute to the plan until she reaches her annual deferral limit of $19,000 even though her compensation will exceed the annual limit of $280,000 in October.

Employer matching contributions

If your plan provides for matching contributions, you must follow the plan’s match formula.

Example: Your plan requires a match of 50% on salary deferrals that do not exceed 5% of compensation. Although Mary earned $360,000, your plan can only use up to $280,000 of her compensation when applying the matching formula for 2019. Mary’s matching contribution would be $7,000 (50% x (5% x $280,000)). Although Mary makes salary deferrals of $19,000, only $14,000 (5% of $280,000) will be matched. She must receive a matching contribution of $7,000 (50% x $14,000) under the terms of the plan.

What does your plan say?

Although not common, a plan can specifically require that salary deferrals cease once a participant’s compensation reaches the annual limit.

If your plan specifies that salary deferrals be based on a participant’s first $280,000 of compensation, then you must stop allowing Mary to make salary deferrals when her year-to-date compensation reaches $280,000, even though she hasn’t reached the annual $19,000 limit on salary deferrals, and must base the employer match on her actual deferrals.

Retirement Plans Frequently Asked Questions (FAQs)

Types of Retirement Plans

Distributions (Withdrawals)

Rollovers

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Forms and Notices

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Correcting Plan Errors

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