The IRS announced the 2021 cost-of-living adjustment (COLA) increases to contribution limits for IRAs and qualified plans.
Each year, the IRS adjusts these numbers for cost-of-living increases in $500 increments when statutory thresholds are met. Although there were no changes to traditional and Roth IRAs, we did see some increase for defined contribution limits with employer contributions.
During discussions regarding maximum contributions for your clients’ traditional or Roth IRAs, it’s important to understand the deductible IRA and Roth IRA phase-out ranges to avoid the 6% excess contributions penalty for your clients. The table and links below may help with planning your client’s contributions for 2021.
More information regarding COLA and phase-out ranges can be found in the 2021 Limitations Adjusted as Provided in Section 415(d), etc. IRS notice. To help give you a rough idea of the maximum allowable contributions for traditional and Roth IRAs, you can use our “How Much Can I Contribute to an IRA?” calculator.
For more information on retirement-planning strategies, please contact the Retirement Strategies Group at (800) 722-2333, or email us at RSG@PacificLife.com.
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