By Sabrina Karl
With the new annual calendar still relatively fresh, Americans are in that roughly three-month period during which both 2020 and 2021 retirement contributions are possible. That’s because the IRS allows you to make your previous year’s contribution to some accounts as late as April 15.
But how much can you contribute? The answer varies based on the account type and your age. Let’s take a look at the three most common tax-deferred retirement accounts: 401(k)s, traditional IRAs, and Roth IRAs.
If you’re enrolled in your employer’s 401(k) plan, you can contribute up to $19,500 in 2021. In addition, those 50 or older this year can utilize the “catch-up contribution” rule, raising their limit by $6,500, or $26,000 total.
Unlike traditional and Roth IRAs, 401(k)s only allow contributions during their respective calendar year. Since contributions are generally only permissible via payroll deduction, there is no option for adding more before you file your tax return.
In contrast, traditional and Roth IRAs allow you to meet your contribution maximum anytime during the calendar year and through April 15 (or whatever that year’s tax filing date is). So with these accounts, you have plenty of time to decide how much you can sock away.
Though traditional and Roth IRAs are different account types (traditional IRAs contribute pre-tax dollars and Roth IRAs contribute already taxed dollars that will be exempt from future taxes), they carry the same IRS limits. And between 2020 and 2021, the limits held steady. Those under 50 can contribute $6,000, and those 50 or older, $7,000.
Note that in the case of traditional and Roth IRAs, it is a combined limit. You cannot contribute $6,000 to both, but rather your contributions to one, the other, or both cannot together exceed $6,000 (or $7,000 for those age 50 or older).