Dive Brief:
- The IRS’ 401(k) individual contribution limit will remain at $19,500 for 2021, the agency announced Oct. 26. For 2020, that limit represented a $500 increase over the previous year.
- Similarly, the catch-up contribution limit for employees 50 and older remains unchanged at $6,500.
- Additionally, income ranges for determining eligibility to make deductible contributions to individual retirement arrangements (IRAs), to contribute to Roth IRAs and to claim the "saver's credit" all increased for 2021, according to the announcement.
Dive Insight:
Employers have long struggled to encourage employee participation in retirement accounts — and many feel an increasing responsibility to do so. Seventy-eight percent of employer respondents to an early 2020 Bank of America survey reported feeling "very or extremely responsible" for helping employees sustain assets through retirement, up from 33% in 2012.
Employers may have their work cut out for them, however. In early March, before widespread layoffs, Betterment for Business survey results revealed that a third of millennials and Gen Zers had dipped into retirement accounts early. Employers "should be doing more to educate young workers on things like how to best utilize these offerings, how much they should be saving, and the importance of not withdrawing money from funds early," the firm’s director of product, Edward Gottfried, said at the time.
The situation may be even more dire now thanks to pandemic-driven job losses. Half of unemployed older workers are at risk of involuntary retirement according to August research from the Schwartz Center for Economic Policy Analysis at The New School. And it’s possible that many weren’t ready: As of 2018, more than half of workers aged 55-64 in a National Institute on Retirement Security study said they had nothing saved for retirement.
