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Retirement Perspectives

401(k) plan participants will have more savings opportunities as most limits have increased for 2020.

On November 6, the IRS published inflation-adjusted figures for retirement accounts for the 2020 tax year. Retirement savers will be happy to know that most limits have increased, thus enabling more savings opportunities. The guidance provides cost of living adjustments affecting dollar limitations for retirement plans and other retirement-related items for tax year 2020.

Contributions to 401(k), 403(b), 457, and Thrift Saving Plan (TSP) increased by $500 to $19,500. In addition, the age 50 catch-up contribution increased by $500 to $6,500. (A catch-up contribution allows people aged 50 or older to make additional contributions to their retirement accounts.)

For a complete list of 2020 plan limits and other retirement related items, see our 2020 Retirement Plan Limits flyer.

 

To comply with Treasury Department regulations, we inform you that, unless otherwise expressly indicated, any tax information contained herein is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed under the Internal Revenue Code or any other applicable tax law, or (ii) promoting, marketing, or recommending to another party any transaction, arrangement, or other matter.

The information is being provided for general educational purposes only and is not intended to provide legal or tax advice. You should consult your own legal or tax advisor for guidance on regulatory compliance matters. Any examples provided are for informational purposes only and are not intended to be reflective of actual results.

The information provided is not directed at any investor or category of investors and is provided solely as general information about Lord Abbett's products and services and to otherwise provide general investment education. None of the information provided should be regarded as a suggestion to engage in or refrain from any investment-related course of action as neither Lord Abbett nor its affiliates are undertaking to provide impartial investment advice, act as an impartial adviser, or give advice in a fiduciary capacity. If you are an individual retirement investor, contact your financial advisor or other fiduciary about whether any given investment idea, strategy, product or service may be appropriate for your circumstances.

401(k) is a qualified plan established by employers to which eligible employees may make salary deferral (salary reduction) contributions on an aftertax and/or pretax basis. Employers offering a 401(k) plan may make matching or nonelective contributions to the plan on behalf of eligible employees and may also add a profit-sharing feature to the plan. Earnings accrue on a tax-deferred basis.

A 403(b) plan is a retirement savings plan that allows employees of public schools, nonprofit, and 501(c)(3) tax-exempt organizations to invest on a pretax and or Roth aftertax basis. Contributions to a 403(b) plan are conveniently deducted directly from your paycheck. In addition, your employer may elect to make a contribution on your behalf.

A governmental 457(b) deferred-compensation plan allows employees of states, political subdivisions of a state, or any agency or instrumentality of a state to invest money on a pretax or Roth aftertax basis through salary reductions. The employer deposits amounts withheld into an annuity, custodial, or a trust account, where the funds accumulate tax-deferred or potentially tax free in the case of Roth aftertax contributions until withdrawals commence, usually at retirement.

A Thrift Savings Plan (TSP) is a retirement savings and investment plan for Federal employees and members of the uniformed services, including the Ready Reserve. It was established by Congress in the Federal Employees' Retirement System Act of 1986 and offers the same types of savings and tax benefits that many private corporations offer their employees under 401(k) plans.

Webinar: 2019 Year-End Focus: Retirement, Health Care & Education Opportunities

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Join Brian Dobbis in a discussion about year-end retirement tips on Tues., Nov. 19 at 4 pm ET. Advisors can earn CE credit for attending the live webinar.

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