About to contribute a pension plan? If you’re in the private sector, then pension plans are funded by your employer. They will contribute a pool of funds set aside for a worker’s future benefit. These funds are invested on your behalf in order to generate a consistent income when you retire.
How Much are You Allowed to Contribute a Pension Plan?
If you work in the public sector, you can receive a government employee pension plan that’s often footed by taxpayers. It’s often a complement to Social Security and personal investment. In fact, you have the option to contribute a portion of each paycheck to your preferred retirement system.
Moreover, some pension plans come with a voluntary investment component. If you have such a pension plan, you could contribute part of your current income from wages into a retirement investment plan.
Your employer can also match a portion of your annual contributions. This is usually up to a specific percentage or dollar amount.
Contribution and Benefit Limits
For 2020, here is a list of retirement plan contributions and benefit limits. Make sure to check these figures annually. Usually, the figure can be counted on to increase by $500 each year.
- $19,500 for the annual employee contribution limit for 401(k), 403(b), or 457 savings plans.
- $6,500 for the annual catch-up contribution limit for 401(k), 403(b), or 457 savings plans if the employee is age 50 or over.
- $230,000 is the maximum annual benefit payable by a defined benefit pension plan.
- $57,000 is the annual limit for combined employer-employee contributions to a defined contribution plan.
- $6,000 is the annual contribution limit to an Individual Retirement Account for individuals.
- $1,000 for the annual catch-up contribution limit for Individual Retirement Accounts for individuals age 50 or over.
- $13,500 is the annual employee contribution for SIMPLE plans.
- $3,000 for the annual catch-up employee contribution for SIMPLE plans if the employee is age 50 and over.
- $5,812 doe the maximum monthly amount insured by the Pension Benefit Guaranty Corporation for people in single-employer plans retiring at age 65.
- $1,072 is the maximum monthly amount insured by the Pension Benefit Guaranty Corporation for people in multi-employer plans retiring with 30 years of service.
- $137,700 is the maximum amount of wages taxable by Social Security.