The annual tax-deferred amounts workers can set aside for their retirement will increase for 2020, the Internal Revenue Service (IRS) has announced.
Next year, the contribution limit for employees who take part in a 401(k) or similar plan, such as a 403(b), 457 or Thrift Savings Plan, will be $19,500, up from $19,000. For workers 50 and older, the additional so-called catch-up limit goes from $6,000 to $6,500, for a total limit of $26,000.
In a 401(k) account, taxes are not paid until the account holder begins withdrawing the money. Withdrawals are taxed as ordinary income. If a holder withdraws money before age 59 1/2, he or she is assessed a 10 percent surtax.
