Author Topic: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020  (Read 2757 times)

DadJokes

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https://thefinancebuff.com/401k-403b-ira-contribution-limits.html

IRS probably won't release info for another month, but this site has accurately predicted increases in the past.

Also of note: IRA contribution limits not expected to increase.

Elle 8

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If this is right it will make for a nice round $500 a week since I'm over 50.

rudged

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EscapedApe

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #3 on: November 06, 2019, 01:25:25 PM »
This would be great. The more income you can shield from taxes, the better.

aboatguy

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #4 on: November 06, 2019, 07:03:24 PM »
Too bad they didn't increase the IRA limit

Nothlit

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #5 on: November 07, 2019, 08:21:44 AM »
The IRA limit just went up last year. It takes a while for inflation to push it above the next $500 rounding threshold. I don't think they can just arbitrarily raise it beyond that, absent Congress passing a new law.

Phenix

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #6 on: November 07, 2019, 08:47:00 AM »
Too bad they didn't increase the IRA limit

I agree.  Even with access to TSP funds, my preference would still be to put more in my Fidelity accounts.

Villanelle

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #7 on: November 07, 2019, 08:51:07 AM »
Too bad they didn't increase the IRA limit

I agree.  Even with access to TSP funds, my preference would still be to put more in my Fidelity accounts.

I'm curious--why is that?  Generally TSP is considered the best thing going as far as expenses. 

ender

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #8 on: November 07, 2019, 09:02:00 AM »
Nice, will be able to save some more in 401k then. Woot.

EscapedApe

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #9 on: November 07, 2019, 09:10:02 AM »
So, can someone explain the differences in 401(k) vs IRA contribution limits?

I thought the $19.5K contribution limit was a sum on all contributions made to all tax-advantaged accounts (401(k) and IRA).

Are you able to contribute $19.5K to an employer-sponsored 401(k), and another $6K to an IRA?

DadJokes

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #10 on: November 07, 2019, 09:13:25 AM »
So, can someone explain the differences in 401(k) vs IRA contribution limits?

I thought the $19.5K contribution limit was a sum on all contributions made to all tax-advantaged accounts (401(k) and IRA).

Are you able to contribute $19.5K to an employer-sponsored 401(k), and another $6K to an IRA?

Yes to the bolded.

terran

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #11 on: November 07, 2019, 09:15:50 AM »
So, can someone explain the differences in 401(k) vs IRA contribution limits?

I thought the $19.5K contribution limit was a sum on all contributions made to all tax-advantaged accounts (401(k) and IRA).

Are you able to contribute $19.5K to an employer-sponsored 401(k), and another $6K to an IRA?

The limits are separate.

In 2019 you can contribute $19k + $6k = $25k between the two accounts. In 2020 you will be able to contribute $19.5k + $6k = $25.5k between the two accounts. the 401(k) salary deferral must be contributed during the year (unless you're self employed) but the IRA contribution can be made any time until your tax filing deadline (around 4/15) including filed extensions (around 10/15), so if you're set to max your 401(k) you may still have time to contribute to your IRA as well.

charis

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #12 on: November 07, 2019, 09:40:40 AM »
So, can someone explain the differences in 401(k) vs IRA contribution limits?

I thought the $19.5K contribution limit was a sum on all contributions made to all tax-advantaged accounts (401(k) and IRA).

Are you able to contribute $19.5K to an employer-sponsored 401(k), and another $6K to an IRA?

The limits are separate.

In 2019 you can contribute $19k + $6k = $25k between the two accounts. In 2020 you will be able to contribute $19.5k + $6k = $25.5k between the two accounts. the 401(k) salary deferral must be contributed during the year (unless you're self employed) but the IRA contribution can be made any time until your tax filing deadline (around 4/15) including filed extensions (around 10/15), so if you're set to max your 401(k) you may still have time to contribute to your IRA as well.

HSA and 457 (deferred comp account) are also a tax advantaged accounts with separate contribution limits.

EscapedApe

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #13 on: November 07, 2019, 09:41:05 AM »
Nice. I was understanding this all wrong then.

I was concerned because even after maxing my HSA and TSP contributions, I felt like I still had a lot of income being taxed. Now that I know that the TSP and IRA contribution limits are separate, I will open an IRA as soon as I pass step (2) in the investment order.

Thank you @DadJokes and @terran.

Philociraptor

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #14 on: November 07, 2019, 10:31:54 AM »
Contribution limits and tax bracket changes are like video game patch notes but in real life. We're getting buffed y'all!

DadJokes

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #15 on: November 07, 2019, 10:46:27 AM »
Contribution limits and tax bracket changes are like video game patch notes but in real life. We're getting buffed y'all!

Heh, I put the new standard deduction and brackets into my spreadsheet for tax planning. My estimated tax liability went down $55.

Time to party!

Phenix

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #16 on: November 07, 2019, 11:04:55 AM »
Too bad they didn't increase the IRA limit

I agree.  Even with access to TSP funds, my preference would still be to put more in my Fidelity accounts.

I'm curious--why is that?  Generally TSP is considered the best thing going as far as expenses.

A year or so ago, I would have agreed, but Fidelity has lowered their expenses to the point where it really makes no difference now.  They even offer a handful of funds with zero expenses.

EvenSteven

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #17 on: November 07, 2019, 11:43:50 AM »
Contribution limits and tax bracket changes are like video game patch notes but in real life. We're getting buffed y'all!

Then the Consumer Price Index comes along and hits us all with the nerf stick.

fattest_foot

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #18 on: November 07, 2019, 11:56:01 AM »
I'm curious--why is that?  Generally TSP is considered the best thing going as far as expenses.

I think that's really a relic of the past. Vanguard and Fidelity are so low at this point that I don't know that low fees is really a "selling point" anymore for the TSP.

I think the G Fund is still a really good deal, but I don't even own treasuries myself.

terran

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #19 on: November 07, 2019, 12:20:40 PM »
Nice. I was understanding this all wrong then.

I was concerned because even after maxing my HSA and TSP contributions, I felt like I still had a lot of income being taxed. Now that I know that the TSP and IRA contribution limits are separate, I will open an IRA as soon as I pass step (2) in the investment order.

Thank you @DadJokes and @terran.

Be sure you take a look at the deduction limits: https://www.irs.gov/retirement-plans/ira-deduction-limits. While the contribution limits aren't changed by your TSP, the fact that you are covered by a workplace retirement plan means you can only deduct traditional IRA contributions if you're under a certain income level.

erutio

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #20 on: November 07, 2019, 12:30:39 PM »
If this is right it will make for a nice round $500 a week since I'm over 50.

$19500 also divides nicely into $750 for every 2 week pay period, for those of us who can set withholding to a dollar amount vs percentage.

EscapedApe

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #21 on: November 07, 2019, 01:12:56 PM »
Nice. I was understanding this all wrong then.

I was concerned because even after maxing my HSA and TSP contributions, I felt like I still had a lot of income being taxed. Now that I know that the TSP and IRA contribution limits are separate, I will open an IRA as soon as I pass step (2) in the investment order.

Thank you @DadJokes and @terran.

Be sure you take a look at the deduction limits: https://www.irs.gov/retirement-plans/ira-deduction-limits. While the contribution limits aren't changed by your TSP, the fact that you are covered by a workplace retirement plan means you can only deduct traditional IRA contributions if you're under a certain income level.

That might be what nails me in the end.

It doesn't say how much the partial deduction comes out to. That might be where I fall.

dandarc

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #22 on: November 07, 2019, 01:30:53 PM »
What you can do in that case is just make your IRA deduction as normal, then call your broker and recharacterize the non-deductible portion to Roth once your numbers are in. You have until your tax filing deadline, with an extension if you filed for that to do this. So you don't have to guess correctly about whether you can deduct or not.

Or you could wait until your tax documents are all in and make your decision early next year - you have until your tax filing deadline (no extension) to fund an IRA for a given tax year, so for 2019 IRA contributions, you don't have to make the contribution until April 15th 2020.

EvenSteven

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #23 on: November 07, 2019, 01:57:48 PM »
What you can do in that case is just make your IRA deduction contribution as normal, then call your broker and recharacterize the non-deductible portion to Roth once your numbers are in. You have until your tax filing deadline, with an extension if you filed for that to do this. So you don't have to guess correctly about whether you can deduct or not.

Or you could wait until your tax documents are all in and make your decision early next year - you have until your tax filing deadline (no extension) to fund an IRA for a given tax year, so for 2019 IRA contributions, you don't have to make the contribution until April 15th 2020.

I think you meant the corrected bit quoted above. It's also important to make sure ones MAGI isn't above the limit for Roth contributions if one is to do this.

dandarc

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #24 on: November 07, 2019, 02:05:40 PM »
What you can do in that case is just make your IRA deduction contribution as normal, then call your broker and recharacterize the non-deductible portion to Roth once your numbers are in. You have until your tax filing deadline, with an extension if you filed for that to do this. So you don't have to guess correctly about whether you can deduct or not.

Or you could wait until your tax documents are all in and make your decision early next year - you have until your tax filing deadline (no extension) to fund an IRA for a given tax year, so for 2019 IRA contributions, you don't have to make the contribution until April 15th 2020.

I think you meant the corrected bit quoted above. It's also important to make sure ones MAGI isn't above the limit for Roth contributions if one is to do this.
Good catch on the error there.

I will say  - if you are in the phase-out range for the tIRA deduction as EscapedApe seems to be from the prior post, then odds are very high you're fine for a Roth IRA contribution.

EscapedApe

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #25 on: November 07, 2019, 03:10:21 PM »
What you can do in that case is just make your IRA deduction contribution as normal, then call your broker and recharacterize the non-deductible portion to Roth once your numbers are in. You have until your tax filing deadline, with an extension if you filed for that to do this. So you don't have to guess correctly about whether you can deduct or not.

Or you could wait until your tax documents are all in and make your decision early next year - you have until your tax filing deadline (no extension) to fund an IRA for a given tax year, so for 2019 IRA contributions, you don't have to make the contribution until April 15th 2020.

I think you meant the corrected bit quoted above. It's also important to make sure ones MAGI isn't above the limit for Roth contributions if one is to do this.
Good catch on the error there.

I will say  - if you are in the phase-out range for the tIRA deduction as EscapedApe seems to be from the prior post, then odds are very high you're fine for a Roth IRA contribution.

So, are you saying I should set up a Mega Backdoor Roth using a traditional IRA and Roth IRA?

Note: My TSP traditional account (which functions like a traditional 401(k)) does not allow for contributions beyond the $19.5K cap, so I cannot use it to set up a Mega Backdoor Roth.

EvenSteven

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #26 on: November 07, 2019, 03:32:01 PM »
What you can do in that case is just make your IRA deduction contribution as normal, then call your broker and recharacterize the non-deductible portion to Roth once your numbers are in. You have until your tax filing deadline, with an extension if you filed for that to do this. So you don't have to guess correctly about whether you can deduct or not.

Or you could wait until your tax documents are all in and make your decision early next year - you have until your tax filing deadline (no extension) to fund an IRA for a given tax year, so for 2019 IRA contributions, you don't have to make the contribution until April 15th 2020.

I think you meant the corrected bit quoted above. It's also important to make sure ones MAGI isn't above the limit for Roth contributions if one is to do this.
Good catch on the error there.

I will say  - if you are in the phase-out range for the tIRA deduction as EscapedApe seems to be from the prior post, then odds are very high you're fine for a Roth IRA contribution.

So, are you saying I should set up a Mega Backdoor Roth using a traditional IRA and Roth IRA?

Note: My TSP traditional account (which functions like a traditional 401(k)) does not allow for contributions beyond the $19.5K cap, so I cannot use it to set up a Mega Backdoor Roth.

Some terminology incoming that can be confusing to keep straight. In general:

A backdoor Roth is a non-deductible contribution to a traditional IRA that is then converted to a Roth IRA.

A mega backdoor Roth is a non-deductible contribution to a 401k or 403b that is then converted to a Roth IRA .

What was suggested was neither, it was a contribution to a traditional IRA that could then be recharacterized to a Roth IRA if needed.

EscapedApe

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #27 on: November 07, 2019, 05:19:26 PM »
What you can do in that case is just make your IRA deduction contribution as normal, then call your broker and recharacterize the non-deductible portion to Roth once your numbers are in. You have until your tax filing deadline, with an extension if you filed for that to do this. So you don't have to guess correctly about whether you can deduct or not.

Or you could wait until your tax documents are all in and make your decision early next year - you have until your tax filing deadline (no extension) to fund an IRA for a given tax year, so for 2019 IRA contributions, you don't have to make the contribution until April 15th 2020.

I think you meant the corrected bit quoted above. It's also important to make sure ones MAGI isn't above the limit for Roth contributions if one is to do this.
Good catch on the error there.

I will say  - if you are in the phase-out range for the tIRA deduction as EscapedApe seems to be from the prior post, then odds are very high you're fine for a Roth IRA contribution.

So, are you saying I should set up a Mega Backdoor Roth using a traditional IRA and Roth IRA?

Note: My TSP traditional account (which functions like a traditional 401(k)) does not allow for contributions beyond the $19.5K cap, so I cannot use it to set up a Mega Backdoor Roth.

Some terminology incoming that can be confusing to keep straight. In general:

A backdoor Roth is a non-deductible contribution to a traditional IRA that is then converted to a Roth IRA.

A mega backdoor Roth is a non-deductible contribution to a 401k or 403b that is then converted to a Roth IRA .

What was suggested was neither, it was a contribution to a traditional IRA that could then be recharacterized to a Roth IRA if needed.

No kidding.

Thanks for the clarification, dude. I'll look further into this.

Elle 8

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Re: 401k/403b/457b contribution limits expected to increase to $19,500 in 2020
« Reply #28 on: November 13, 2019, 05:24:37 AM »
If this is right it will make for a nice round $500 a week since I'm over 50.

Darn, 53 Thursdays (my payday) in 2020 so it will not be a nice round number.