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Curious how much you can invest toward your retirement in 2020? The IRS has announced the 2020 contribution limits for retirement and health savings accounts. Changes include increased contribution limits for 401(k) and 403(b) plans, as well as income limits for IRA contribution deductibility. Additionally, the salary threshold to classify “key” and “highly compensated employees” has been announced. Review our quick guide of the updated limits below.
2020 401(k) and 403(b) individual contribution limits (IRS 402(g) Limit)
Age 49 and under
Age 50 and older
The IRS has also set limits for the total amount that may be contributed to your retirement savings 401(k) account from all sources combined (IRS section 415 limit). This includes any employer matching or profit-sharing contributions, and any employee after-tax contributions. For 2020, the maximum is $57,000.
Every plan is different, so it’s important to refer to your Plan Document for any compensation or other applicable limits.
2020 Highly Compensated and Key Employee definitions and limits
Key Employee Officer Compensation
Highly Compensated Employee
Annual Compensation Limit
2020 Roth and Traditional IRA contribution limits
Age 49 and under
Up to $6,000 (must have earned income)
Age 50 and older
2020 Traditional IRA modified adjusted gross income limit for partial deductibility
$65,000 – $75,000
Married – Filing joint returns
$104,000 – $124,000
Married – Filing separately
$0 – $10,000
Non-active participant spouse
$196,000 – $206,000
2020 Roth IRA modified adjusted gross income phase-out ranges
$124,000 – $139,000
Married – Filing joint returns
$196,000 – $206,000
Married – Filing separately
$0 – $10,000
2020 Simple IRA contribution limits
Age 49 and under
Age 50 and older
2020 Health Savings Accounts (HSA) contribution limits
Individual (employer + employee)
Family (employer + employee)
Age 55 or older**
**Catch-up contributions can be made at any time during the year in which the HSA participant turns 55.
From new Department of Labor regulations to state-mandated retirement plans, there is no shortage of activity in the retirement space today. Industry publications regularly turn to our team members for their expert opinions on the latest announcements, programs and research impacting retirement savers like you.
We recapped some of these happenings below with media articles featuring our team’s insight. To find future insight from the Ubiquity team, follow us on Twitter, Facebook, LinkedIn and YouTube.
Employee Benefit News
When the Department of Labor reduced the limitations governing multiple employer plans (MEPs), Employee Benefit News consulted our Vice President of Compliance and Regulatory Affairs, Nasrin Mazooji. Nasrin weighed in on the likelihood that the industry will move to authorize open MEPs, which would allow employers without a common nexus to join forces and offer a retirement savings plan.
In their current design, MEPs typically reduce the cost, administrative burden and fiduciary liabilities associated with offering small business employees access to a workplace retirement savings plan. However, they aren’t quite as flexible as company-sponsored retirement plans. Nasrin explained why MEPs aren’t a one-size-fits-all solution and how small businesses should approach them under this new legislative action.
Another area of legislation impacting the retirement savings industry is state-mandated retirement plans. More than 30 states have expressed interest in establishing legislation requiring small businesses to offer employees a retirement plan. Our Director of Product Development, Ashvin Prakash, has been keeping a close eye on the implementation and adoption of these programs and recently authored a piece for 401k Specialist about how they could affect 401(k) product development.
In an effort to better serve small businesses, more 401(k) providers are opting for simplified plan designs and increased reliance on flat-fee models. To compete with the state’s plan, private providers will likely incorporate 3(38) offerings into their plans to reduce fiduciary risk and develop new API integrations to streamline payroll automation.
With the introduction of these mandates, Ashvin expects demand for savings plans to increase. Our team is continuing to monitor how these state-sponsored retirement plans will affect small businesses and the retirement industry as a whole.
Research indicates that 42 percent of Generation X is prioritizing paying off debt over saving for retirement. PLANSPONSOR, a go-to resource for America’s retirement benefits decisionmakers, turned to our Founder and CEO, Chad Parks, for insight on the unique financial challenges facing this generation and how plan sponsors can help individuals tackle them.
As a Gen Xer himself, Chad shared his experience of juggling financial responsibilities as part of the sandwich generation and how account aggregation solutions can help people in similar situations appropriately allocate their money and prioritize saving for retirement.
With more than 24 years of experience in the retirement industry, Chad has witnessed firsthand the evolution of 401(k) record-keeping technology. In this bylined article, Chad shares his observations from his time as an independent registered investment advisor and CFP. The difficulty he experienced in finding plan providers who offered cost-effective access to multiple fund families for his small business clients led him to establish an online, fully bundled, open architecture 401(k) platform in 1999. Chad’s vision withstood and evolved with the introduction of numerous regulatory changes such as the Single(k), fee disclosure rules and the fiduciary rule.
These technological advancements have improved small business access to professional investment management, lowered costs associated with offering a workplace retirement savings plan and automated investment selection. For this reason, Chad underscores how crucial it is for advisors today to embrace technology but never underestimate the value of human connection in client relationships.
The extended U.S. government shutdown that occurred earlier this year shined an unflattering spotlight on our country’s financial preparedness.
It revealed that many people who wouldn’t typically be considered impoverished are still clearly living paycheck to paycheck. This certainly doesn’t bode well for them saving enough money to be financially independent in retirement.
Now, more than ever, retirement is built on personal savings and it’s up to the individual — not the government or employers — to make that dream a reality. The notion of working your entire life while simultaneously stashing away money for your future is something I frequently refer to as, “the great retirement experiment.” Let’s take a look at how we got here.
How our modern retirement system came to be
Before the 20th century, our country’s economy was based almost entirely on agriculture. Americans didn’t have hopes or dreams about retirement in the 1700s, 1800s or even early 1900s. They simply worked until they no longer could, and hoped that their families would take care of them in old age.
The retirement system that we know of today didn’t come into existence until after World War II. Following the war, companies hired people in droves and provided pensions. At the time, this was the best concept available for retirement security and many people from this generation benefited. My grandparents, for example, retired with a full pension and my father retired with a partial pension. As time went on, however, companies realized funding these programs entailed a lot of complexity and decided to freeze pensions or stop offering them altogether.
In the late 1970s, the government recognized these resources wouldn’t sufficiently support people through their retirement years, so it implemented tax-deferred savings accounts and the 401(k) was born shortly thereafter in the early 1980s.
The broken three-legged stool of retirement
Over many decades, we have come to think of retirement as a three-legged stool consisting of Social Security, a pension and personal savings, all working together to fund your retirement. Today, the three-legged stool looks more like a pogo stick.
Social Security, the first leg, is projected to have a reduction in benefits by 2034, if no changes are made today. This program was introduced in 1935 and originally designed to help those in dire need of financial assistance. It was never intended to be relied on as heavily as it is today as a primary means of retirement income.
Personal pensions, the second leg, have recently seen a staggering, swift disappearance. This chart, provided by CNN Business with data from Pension Benefit Guaranty Corporation, depicts the shrinking population of workers covered by company pensions. Today, the majority of workers don’t expect to see a pension unless they’re unionized or government employees.
With pensions nearly extinct and Social Security looking less and less reliable as a means of income, the onus is now largely on individual citizens to save enough money during their lifetimes for retirement, serving as the vital “pogo stick” leg of the stool. Realistically speaking, can people bear that burden?
This is why we call it the great retirement experiment. Although the outcome is unknown, it must be brought to light.
The challenge is that not everyone takes a diligent and responsible approach to saving for retirement on their own, nor should they be expected to. We have asked everyday people to become both financial and investment experts, which ultimately may set them up for failure. Not to mention, people are now living longer than ever before and working later in life to fund retirement or catch up on lost savings.
How defaulting to Social Security could change it all
So, how can we solve the issue of underfunded retirements? While there is no surefire solution, I believe a significant adjustment to our Social Security system could alleviate much of the burden currently placed on everyday Americans.
Let’s keep Social Security as we know it today, the same. However, let’s augment the required Social Security savings from both the employer and the employee by doubling the amount saved, which would add an additional 12.4% (6.2% employer contribution, 6.2% personal contribution, doubling it would increase it to 24.8%) of income contributed to retirement. This could be credited into an account that is in the individual’s name so they have complete control over the investments, but won’t be able to access to the funds until normal retirement age.
Retirement accounts like 401(k)s and IRAs would still be in play, just not as the main source of income. This also solves the portability issues with retirement accounts. If the Social Security account is already under an individual’s ownership, it doesn’t matter how often you change jobs.
Bottom line, our retirement system is not as good as it gets. Savers must be aware of the flaws in the existing retirement savings experiment as well as the great responsibility of saving for their own future.
As a pioneer in small business retirement savings, we’ve been leading the charge for nearly 20 years on making it as simple and convenient as possible to save for your future. With this mission rooted deep in our company, respected members of the media frequently turn to Ubiquity Retirement + Savings for our insights and expertise on the retirement market, savings strategies, and fintech industry trends.
Check out some recent media placements below, featuring insights from our Founder and CEO, Chad Parks. For more tips on optimizing your firm’s retirement savings plan, follow us onTwitter,Facebook,LinkedIn, andYouTube.
From his early days as a financial advisor to his current role at Ubiquity, Chad has seen a lot of changes and improvements in financial services throughout his career. He drew upon these experiences to craft some ‘predictions’ for the industry, which he recently shared with the readers of WealthManagement.com. In this bylined article, Chad pointed to two key trends that could transform the financial services landscape, including the introduction (and eventual takeover) of artificial intelligence in financial advisory roles and the elimination of the asset-based fee model. Though these changes may seem drastic, Chad underscored that they will ultimately improve the savings experience for businesses and everyday consumers alike.
Zacks Investment Research welcomed Chad on its Tech Talk Tuesday podcast to discuss everything from the small business retirement plan marketplace, to financial technology, to potential implications of the looming retirement crisis. Host Ryan McQueeney kicked things off by asking Chad about his early career in financial services, where Chad illustrated what sparked his passion for serving the small business market. From there, Ryan and Chad covered the current small business retirement landscape and how Ubiquity got its start catering to this historically underserved community. Chad then highlighted his involvement in producing the “Broken Eggs Film” documentary, which shines a light on the dangers of an under-funded retirement with powerful stories from real people. Closing out the conversation, Ryan and Chad discussed how the fintech industry will continue to become further integrated to provide a “one-stop-shop” for the best possible user experience. This podcast was even picked up byYahoo Finance andNasdaq!
PLANSPONSOR, a leading retirement industry trade publication, turned to Chad for his thoughts on best practices when converting to a new retirement plan recordkeeper. In this piece authored by Editor Lee Barney, Chad discussed how to keep things organized when making the transition to a new recordkeeper, and by extension, how to avoid any mishaps in the process. This means getting your documents, including financial statements, compliance tests and annual reports, organized before you even start the process. Chad also underscored the importance of ensuring everything is fully compliant with the Department of Labor (DOL) and Internal Revenue Service (IRS) prior to the conversion, and double- and triple-checking that participant account balances are correct once the conversion is complete.
A successful retirement doesn’t stop at building a nest egg; having a plan to guide your decisions along the way is critical. That’s why Chad spoke with Kiplinger’s Retirement Report Editor Rachel Sheedy to identify key dates those nearing retirement can’t afford to miss out on. Chad reminded savers that all 2018 IRA contributions must be made by the tax-filing deadline of April 15, 2019. For the 2018 calendar year, Chad noted IRA contribution limits are capped at $5,500 for those under age 50 and $6,500 for those over 50. He also provided tips to ensure all your paperwork is in order to properly file crucial tax documents ahead of the deadline.