2021 IRA/Roth IRA Income Limits
The IRS has recently announced updated income limits for individuals who save into IRAs and Roth IRAs. Depending on your income, you can receive a full deduction for IRA contributions or be eligible for a full contribution amount for Roth IRAs. While this is good news for individuals who save into these types of accounts, the unfortunate news is that the IRS has not announced any increases to the contribution limits of IRA/Roth IRAs. They will remain unchanged at the $6,000 limit and the catch-up limit of $1,000 for those age 50+.
Below are the updated income limit charts for each type of account:
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2021 Traditional IRA Deduction Limits |
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Filing Status |
Modified Adjusted Gross income |
Deduction Limit |
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≤ $66,000 |
Full Deduction |
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Single |
> $66,000 but < $76,000 |
Partial Deduction |
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≥ $76,000 |
No deduction |
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≤ $105,000 |
Full Deduction |
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Married Filing Jointly |
> $105,000 but < $125,000 |
Partial Deduction |
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≥ $125,000 |
No deduction |
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Married Filing Separate |
< $10,000 |
Partial Deduction |
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≥ $10,000 |
No deduction |
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2021 Roth IRA Direct Contribution Limits |
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Filing Status |
Modified Adjusted Gross income |
Contribution Limit |
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≤ $125,000 |
Full Contribution |
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Single |
> $125,000 but < $140,000 |
Partial Contribution |
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≥ $140,000 |
Not Eligible |
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≤ $198,000 |
Full Contribution |
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Married Filing Jointly |
> $198,000 but < $208,000 |
Partial Contribution |
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≥ 208,000 |
Not Eligible |
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Married Filing Separate |
< $10,000 |
Partial Contribution |
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≥ $10,000 |
Not Eligible |
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Individuals who are looking to save into a Roth IRA but are above the income thresholds can consider a back-door Roth IRA contribution.
Qualified Retirement Plan (401(k), 403(b), 457, etc.) limit
The IRS has not announced any contribution limit increases for 2021. These retirement accounts will have the same $19,500 contribution limit and the age 50+ catch-up limit of $6,500.
Social Security
Beginning January 2021, Social Security benefit recipients will receive an increased 1.3% cost-of-living adjustment.
Working individuals will find that the Social Security taxable wage base will increase to $142,800 in 2021, up from $137,700. That means employees will pay 6.2% of their wages for Social Security taxes. Employers pay a matching amount into the system, so if you are self-employed you get to pay 12.4% on the first $142,800 of your income.
Conclusion
Ultimately, these increased limits mean slightly more breathing room for your savings capability. Consulting with a fee-only financial advisor can help you stay on track to meet your savings goals.
Weingarten Associates is an independent, fee-only Registered Investment Advisor in Lawrenceville, New Jersey serving Princeton, NJ as well as the Greater Mercer County/Bucks County region. We make a difference in the lives of our clients by providing them with exceptional financial planning, investment management, and tax advice.