2020 IRA Contribution Limits

2020 IRA Contribution Limits

Self-directed IRAs are a great way to save for retirement while deferring taxes on alternative investments like real estate, futures and forex, precious metals and notes. All gains inside of individual retirement accounts grow tax-free and there is no limit on how much profit you can earn.

How Often do Retiremement Limits Change?

The IRS does limit the amount of money that you can personally contribute to an IRA each year. They adjust this occasionally and often without fanfare so it is incumbent upon you to keep your ear to the ground for these announcements.  Your CPA or tax advisor should be well-aware of these adjustments as well. These increases are not done with the intent of creating more growth for investors’ retirement accounts but rather to adjust for inflation. The IRS typically make these adjustments in $500 increments.

What are the 2020 Contribution Limits?

The 2020 IRA contribution limits will remain the same as the 2019 contribution limits. For traditional and Roth IRAs, the 2020 contribution limit is $6,000 for individuals younger than 50, and $7,000 for individuals 50 and over. 
The annual contribution limit for SEP and SIMPLE IRA’s has not changed.  SEP IRA contribution limits are 25% of net earnings up to $57,000.  For SIMPLE IRAs the contribution limit is $13,000 or $16,000 if you’re 50 or older. And with SIMPLE IRAs, employers can match the contributions that you make up to a maximum of 3% of compensation or they can contribute 2% of compensation.

For details about other types of retirement plans, the best source is the IRS itself. Their FAQ page provides an easy to understand breakdown of limits and timing by type of retirement account.

What is the timing for IRA contributions?

You can begin making 2020 contributions to your self-directed IRA starting on January 1st, 2020. And if you haven’t already made a 2019 IRA contribution you have until April 15th, 2020 to do so.

If the increase in limits does not seem significant, you should consider the power of compounding. Because interest is added back into principal, compounding changes growth from a straight line into one that launches upward in what can only be described as a beautiful arc. And the more money there is, the more beautiful that curve can look!

For questions about contribution limits for 2020, types of retirement accounts, or to open a self-directed IRA at Midland IRA, please contact us at 239-333-1032.