Retirement accounts are the most important tools you have to control your taxes. You can often get upfront deductions to save for retirement, and you also get valuable tax deferral while money stays in those accounts.
2021 isn't shaping up to be a big year for changes to key items like contribution limits for IRAs and 401(k)s. IRA contribution limits will be the same in 2021 as they were in 2020: $6,000 for those younger than 50 and $7,000 for those 50 or older. Similarly, 401(k) contribution limits will remain $19,500 for those under 50 and $26,000 for those 50 or older.
However, there are other aspects of IRAs, 401(k)s, and other retirement accounts that have subtle changes each year -- specifically, the income limits that apply. Traditional IRAs always allow you to make contributions regardless of income, but you can't always deduct those contributions. Meanwhile, Roth IRAs can prohibit you from making contributions if your income is too high.
The applicable limits for 2021 are below. Below the phase-out range, you're entitled to a full contribution or deduction. Above it, no contribution or deduction is allowed. With it, you can only deduct or contribute a portion of the $6,000 or $7,000 maximum.
|
Filing Status |
Roth IRA Phase-Out Range |
Traditional IRA Phase-Out Range if Worker Has Employer-Sponsored Retirement Account |
Traditional IRA Phase-Out Range if Spouse Has Employer-Sponsored Retirement Account |
|
Single |
$125,000 to $140,000 |
$66,000 to $76,000 |
N/A |
|
Married filing jointly |
$198,000 to $208,000 |
$105,000 to $125,000 |
$198,000 to $208,000 |
|
Married filing separately |
$0 to $10,000 |
$0 to $10,000 |
$0 to $10,000 |
DATA SOURCE: IRS.
No such income limits apply to 401(k) contributions. That's part of what makes them especially valuable for high-income taxpayers.