Most of the new "numbers" are out from the IRS and others concerning 2021. If you're going to effectively plan, you need to know them. So, here are a few.
Let's start with what you can do.
Deferrals to employer plans (401(k), 403(b), TSP) are unchanged at $19,500
Catch up contributions (for those over age 50) are also unchanged at $6,500
IRA limits remain unchanged
Adjusted Gross Income (AGI) limit for contributions to Roth IRAs (or deductible Traditional IRA contributions when spouse is covered by a retirement plan at work) is increased to $208,000 for married couples filing jointly. Phase out begins at $198,000. For singles and Head of Household the phase out range is $125,000 - $140,000
Limit for all contributions to a defined contribution plan increases to $58,000 from $57,000
The amount of income subject to Social Security tax, increases to $142,800. If you were over the limit in 2020 and will be over the limit in 2021 you'll pay an additional $316 in Social Security tax in 2021. You'll continue to pay Medicare Tax on all earned income and if your income exceeds $250,000 for a married couple or $200,000 for a single taxpayer, you may be subject to additional Medicare Surtaxes.
Cost of Living Adjustments
Those receiving Social Security will see a 1.3% increase in benefits. Medicare rates have not been set for 2021 yet, but it is certainly possible that increases could exceed the Social Security increase. For those paying the lowest Medicare premiums, your net Social Security benefit will not go down.
Military retirement will go up by the same amount as will VA Disability Compensation. If your retired in 2020, you won't see the full COLA increase.
Those covered by the Federal Employee Retirement System (FERS) will also see a 1.3% increase. FERS increases don't always equal the Social Security increase. This is normally the case if the COLA is greater than 2%.
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