Guide to the 2021 Retirement Contribution Limits

Dollar bills

For 2021, the IRS has only made minor changes to the contribution limits for all sorts of retirement plans. Let’s take a look at the new contribution limits for 2021.

401(k), 403(b), most 457 plans, and the Federal Thrift Savings Plan Contribution Limits – Unchanged

Limits for 2021 are still $19,500 – the same as in 2020. For those 50 and older, you can contribute an additional $6,500 (also the same as last year), brining your total possible tax-deferred contribution to $26,000.

The limit applies to your combined contributions to both regular 401(k) and Roth 401(k) in sum. Note that these limits cover *your* contributions, not the company’s contributions.

Maximum
Contribution
Employee Contributions (Regular, Roth 401k, or combination of the two)$19,500
Employee Catch-Up Contributions for over age 50+$6,500
Employer Contributions (cannot be more than 25% of the compensation paid)$57,000
Maximum Combined Employer + Employee + Catch Up Contributions$63,500

The IRS has more information on their 401k updates page and also on their 401(k) and Profit-Sharing Plan Contribution page.

IRA and Roth IRA Contribution Limits

The limits on annual contributions to either an IRA or ROTH IRA remain at $6,000 plus the $1,000 catch-up contribution for 2021. Keep in mind that the amounts are totals for both types of accounts together. (For instance, if you are under 50 and contribute $4,000 to one, you can contribute up to $2,000 to the other.)

One big change is that you finally can save past age 70 1/2, but you have to be working (have earned income) in order to make a contribution. In other words, you don’t have to take RMDs (Required Minimum Distributions) until you hit 72 years old.

You can find more at the IRS page on IRA contribution limits, but all the changes from the SECURE act have not yet been fully incorporated.

Caveat on Income: You cannot contribute more than your Earned Income. So if you only had $1,000 in Earned Income, then $1,000 is the most you can contribute. There is an exemption to this, which allows for Spousal IRAs, which allows you to contribute to his/her account even if that person does not have Earned Income (but  you still must, and the income limit still applies).
If your filing status is…And your Modified AGI is…Under 50 Years Old ContributionOver 50 Years Old Contribution
Married, filing jointly or qualifying widow(er)
Less than
$198,000
$6,000$7,000
Between
$198,000 – 208,000
partialpartial
More than
$208,000
$0$0
Married, filing separately and you lived with your spouse
at any time during the year
Less than
$10,000
partialpartial
More than
$10,000
$0$0
Single, head of household, or married, filing separately
and you did not live with your spouse at any time during the year
Less than
$125,000
$6,000$7,000
Between
$125,000 – 140,000
partialpartial
More than
$140,000
$0$0
2021 Updated Income Limits

Turbotax has a great summary on the difference between your AGI and Modified AGI. Make sure you’re familiar with the difference when making investment decisions.

One confusing point - Despite similar names, Roth IRA and Roth 401(k) limits have nothing to do with each other. They only have the same name because that was the name of the Senator - Senator William Roth of Delaware - who originally introduced the legislation in 1997 that created both types of accounts. So you can max out both if you are so inclined.

Summary

All of these rules are in place for the government to encourage you to save for retirement. So let’s take a look at what you could do if you took complete advantage of these accounts.

  • For your 401(k), you can contribute $26,000: $19,500 + $6,500 catch up contribution
  • For your IRA or Roth IRA, you can contribute $7,000: $6,000 ( + $1,000 catch up contribution if you are over 50)
  • Your Employer could contribute $37,500 (but only as a pre-tax option)
  • Total savings: A whopping $70,500 (if you are married, double it: $141,000)

Clearly this is a lot of money – more than most families in America make in a year. So most people will never get close to this limit – but if you have the ability to save that much, the government will let you.