With 2020 quickly coming to an end, there are many changes to make you aware of the 2021 limits.
If you are contributing to your 401(k), 403(b), 457(b), your contribution limit has not changed. Under age 50, you can defer $19,500 of your wages into your employer 401(k) plan. If you are over 50 years old, you can defer an additional $6,500 as a catch-up contribution. You can contribute a maximum of $26,000 ($19,500 + $6,500 catch-up).
Simple IRA contribution limits have not changed. Employees can defer up to $13,500. Anyone over 50 can contribute an additional $3,000 as catch-up contributions.
Health Savings Accounts (HSA) limits in 2020 were $3,500 for self-only plans and $7,100 for family plans. In 2021, the HSA contribution limit for employer and employee contributions have increased to $3,600 for self-only plans and $7,200 for family plans. HSA catch-up contribution limit for people age 55 and older is still $1,000. Over age 55 you would be allowed contribute $4,600 for self-only plans ($3,600 + $1,000 catch-up) and $8,200 for family plans ($7,200 + $1,000 catch-up).
If you are utilizing a healthcare Flexible Spending Accounts (FSA), you will not see any change. You can defer up to $2,750 of wages into your FSA per year. You can rollover $550 to next year. Any balance leftover the $550 you lose. Keep in mind when figuring out how much to defer into your FSA each year. It would be best if you only deferred what you will use because you will lose the balance. This is different from an HSA where you can roll all unused funds from year to year.
Wages subject to Social Security payroll tax have increased to $142,800 in 2021. Medicare wages have no limit and will continue to be withheld on 100% of your wages.
If you are under full retirement age and collecting your Social Security benefits, the limit you can earn before having your benefits reduced has increased. In 2021, Social Security recipients under full retirement age will have $1 in benefits held back for every $2 they earned from working above $18,960 a year.
The Social Security cost of living increase for 2021 is 3%.
Medicare Part B premiums increased for 2021 as well. In 2020 the lowest Medicare premium was $144.60 per month. For 2021 the premium has increased by $3.90 for a monthly total of $148.50 for Medicare Part B. You receive your cost of living increase and your Part B premium goes up a little each year. With a 3% Social Security increase and a small Medicare premium increase, most should see an overall increase in their Social Security deposit amount.
Some of these changes are small and some more significant. You may need to adjust your 2021 spending plan. Give us a call if we can help you determine how to make the most of the 2021 changes.
