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IRS RAISES RETIREMENT CONTRIBUTION LIMITS FOR 2020

IRS RAISES RETIREMENT CONTRIBUTION LIMITS FOR 2020

IRS RAISES RETIREMENT CONTRIBUTION LIMITS FOR 2020

Every little bit helps when it comes to our personal finances. That is why it came as such good news that retirement contribution limits are being raised in 2020.

 The IRS made the announcement last month, first informing American workers that their workplace savings plans, such as 401(k), will raise the contribution limit from the current $19,000 to $19,500. This is especially good news for those who are able to contribute the maximum annual amount.  Other workplace plans that will allow the increase are 403(b), most 457 plans, thrift savings plans, profit sharing plans and cash balance pension plans. Employees contributing to these plans should work directly with their company plan administrators in adjusting your contributions. If you are at least 50 years old, be aware that the maximum catch up contributions to 401(k) will increase from $6,000 to $6,500. Remember, whatever your company matches does not count toward your maximum contribution limit. Also, you can start withdrawing your 401(k) funds penalty-free at age 59 ½.

It may come as a surprise to some investors to know that most Americans do not start saving for retirement until they are in their forties. Still, considering the gift of compound interest, here is a reality check about saving: With a six percent monthly rate of return, if a 45-year-old starts investing $19,500 a year, their account would grow to $1.13 million by age 70.

Additionally, the IRS announced that simple IRA contribution limits will be increased from the current $13,000 to $13,500.

The start of a New Year is an ideal time to reevaluate your strategy for retirement savings. Unfortunately, many Americans are not prioritizing saving. In 2018, Northwestern Mutual released results of a study that reveals 1 in 3 Americans have less than $5,000 saved for retirement, while 21 percent of Americans have no retirement savings at all.

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