Retirement and Tax Planning Guide - Facts at a glance - Invesco
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Facts at a glance Retirement and Tax Planning Guide Not a Deposit Not FDIC Insured Not Guaranteed by the Bank May Lose Value Not Insured by any Federal Government Agency
3
Contents Small business/employer
retirement plans
Page 4
Individual retirement
accounts
Page 6
Retirement plan
distribution rules
Page 7
Rollover and transfer
rules
Page 9
Federal tax rates
and schedules
Page 10
Social Security benefits
Page 13
Medicare benefits
Page 154
Small Business/Employer Retirement Plans
Type of Plan Key Features Who Can Establish 2021 and 2020 Contributions
Simplified • Minimal paperwork and reporting. • Self-employed persons, Who Contributes: Employer
Employee • Employers can change their annual partnerships, corporations, • Up to the lesser of 25% of an employee’s
Pension (SEP) contributions, and contributions may and nonprofit groups. eligible compensation or
be discretionary. – $58,000 per employee for 2021
• Deductible employer contributions ($57,000 for 2020).
are made directly to employees’ IRAs.
• All contributions must be 100% vested
immediately.
SIMPLE IRA • Inexpensive 401(k)-type plan • Self-employed persons, Who Contributes: Employee and Employer
for smaller employers. partnerships, corporations, • Employees can defer up to
• No 401(k)-type discrimination testing. nonprofit groups, tax-exempt – $13,500 ($16,500 if 50 or older) for
• Employees can make pretax elective institutions, and government 2021 and 2020.
deferrals. entities with 100 or fewer • Employer must choose one of two options:
• Deductible employer contributions employees who earned $5,000 – Match employee’s contribution dollar
are made directly to employees’ IRAs. or more in compensation in for dollar, up to 3% of compensation
• Employer contributions are mandatory. the preceding year. (no salary maximum; match cannot
• All contributions must be 100% vested • Generally, the employer may exceed deferral limit).1
immediately. not maintain another plan. – Contribute 2% of each eligible
employee’s compensation. Maximum
eligible compensation:
• $290,000 for 2021 tax year
($285,000 for 2020).
Solo 401(k) • Employees may make pretax • Business owners (and their Who Contributes: Business Owner
elective deferrals. spouses) with no employees.2 • Business owner can make up to a 25%3
• Employees may make Roth discretionary profit-sharing contribution
contributions (after tax) if permitted and defer up to
by the plan. – $19,500 ($26,000 if 50 or older) for
• Business owner contribution 2021 and 2020.
requirements are set in the plan • Deferrals and employer contributions
document. Contributions may be cannot exceed the lesser of 100% of
discretionary. compensation or
• Participant loans are available if – $58,000 per person for 2021 tax year
permitted by the plan. ($57,000 for 2020). Catch-up deferrals
are not included in this limit.
• Total employer contributions to the plan
cannot exceed 25% of total eligible
compensation. (Employer contributions
exclude employee deferrals.)
• Maximum eligible compensation:
– $290,000 for 2021 tax year
($285,000 for 2020).
401(k) • Employees may make pretax elective • Partnerships, corporations, Who Contributes: Employee and Employer
deferrals. and nonprofit groups • Employees can defer up to
• Employees may make Roth contributions (no government entities). – $19,500 ($26,000 if 50 or older) for 2021
(after tax) if permitted by the plan. and 2020.
• Employer matching and profit-sharing • Deferrals and employer contributions
contributions may be discretionary cannot exceed the lesser of 100% of
if permitted by the plan. compensation or
• Participant loans are available if – $58,000 per person for 2021 tax year
permitted by the plan. ($57,000 for 2020). Catch-up deferrals
• Vesting schedule on employer are not included in this limit.
contributions is determined by the • Total employer contributions to the plan
employer. cannot exceed 25% of total eligible
• Due to complicated discrimination compensation. (Employer contributions
testing and tax reporting, third-party exclude employee deferrals.)
administrative services are • Maximum eligible compensation:
recommended. – $290,000 for 2021 tax year
($285,000 for 2020).
1. In two years of any five-year period, match can be reduced to 1% of compensation.
2. Solo business owners can be defined as one individual (or the individual and his/her spouse) who owns 100% of the business or one or more partners (or partners
and their spouses).
3. Incorporated businesses can contribute a maximum of 25%, while unincorporated businesses can contribute a maximum of 20% in profit-sharing contributions.5
Small Business/Employer Retirement Plans (continued)
Type of Plan Key Features Who Can Establish 2021 and 2020 Contributions
Safe Harbor • Safe harbor 401(k) permits employers • Partnerships, corporations, Who Contributes: Employee and Employer
401(k) to choose either a 3% non-elective and nonprofit groups (no • Employees can defer up to
and Super contribution or a 4% match on a government entities). – $19,500 ($26,000 if 50 or older) for
Comparability 5% deferral. • Employers must provide a 2021 and 2020.
401(k) • Employer contribution must be made each 30-day notice before • Deferrals and employer contributions
year to maintain safe harbor provisions. establishing the plan. cannot exceed the lesser of 100% of
• Super comparability 401(k) combines compensation or
the features of a new comparability plan – $58,000 per employee for 2021 tax year
(see below) with 401(k) safe harbor ($57,000 for 2020). Catch-up deferrals
provisions. are not included in this limit.
• No 401(k)-type discrimination testing for • Total employer contributions cannot
either plan. exceed 25% of total eligible compensation.
• Participant loans are available for either (Employer contributions exclude employee
if permitted by the plan. deferrals.)
• Due to the complexity of the contribution • Maximum eligible compensation:
calculation, retirement plan administrative – $290,000 for 2021 tax year
services are necessary. ($285,000 for 2020).
Profit-Sharing, • Profit-sharing contribution requirements • Self-employed persons, Who Contributes: Employer
Age Weighted are set in the plan document. partnerships, corporations, • Up to the lesser of 100% of eligible
and New Contributions may be discretionary. and nonprofit groups. compensation or
Comparability • Age-weighted formula is determined by – $58,000 per employee for 2021
the salary range and age of employees. ($57,000 for 2020).
• New comparability formula groups • Total employer contribution cannot
employees into categories and then exceed 25% of total eligible compensation.
bases the formula on each group • Maximum eligible compensation:
as governed by nondiscrimination – $290,000 for 2021 tax year
regulations. ($285,000 for 2020).
• Employers may add a 401(k) salary
deferral feature for all plans.
• Participant loans are available for all if
permitted by the plan.
• Vesting schedule is determined by the
employer for all plans.
• Due to the complexity of the contribution
calculation and nondiscrimination
testing, retirement plan administrative
services are necessary.
403(b)(7) • Participants can make pretax salary • Public schools for grades k-12, Who Contributes: Employee and Employer5
ERISA/ deferral contributions. colleges and universities; • Employees can defer up to
Non-ERISA • Participants can make Roth contributions churches/church-related – $19,500 ($26,000 if 50 or older) for
(after tax) if permitted by the plan. organizations, hospitals, and 2021 and 2020.
• Participant loans are available if other 501(c)(3) tax-exempt • Deferrals and employer contributions
permitted by the plan. organizations. cannot exceed the lesser of 100% of
• Employer contributions are allowed if compensation or
included in the plan.4 – $58,000 per person for 2021 tax year
($57,000 for 2020).5 Catch-up deferrals
and special catch-up contributions are
not included in this limit.
457(b) • Employees make salary reduction • State and local governments Who Contributes: Employee and Employer
contributions or employer contributes. or tax-exempt organizations • Employees and/or employer can
• Participant loans are available if under IRC 501(c). contribute up to
permitted by the plan. – $19,500 ($26,000 if 50 or older) for
• No 10% penalty for early withdrawal upon 2021 and 2020.
retirement or termination of employment
before age 59½ (except for amounts
attributable to rollovers from other plans).
• May cover part-time employees and
independent contractors who perform
services for the employer in addition to
full-time employees.
• Participants can make Roth contributions
(after tax) if permitted by the plan.
4. Employer contributions made by nongovernmental 501(c)(3) employers will likely make the plan subject to the Employee Retirement Income Security Act of 1974. (ERISA).
5. Employees with 15 or more full years of service with an eligible employer may be permitted to make special catch-up contributions of up to $3,000 over the
elective deferral limit. The maximum lifetime amount is $15,000 over five years. Age 50 catch-up contributions count against the $15,000 cumulative limit.
All rules related to the establishment or maintenance of each plan type are not included in this summary. Additional rules may also apply if an employer maintains
multiple plans. Please consult your tax or legal advisor for detailed information. Invesco representatives do not provide investment or tax advice.6
Individual Retirement Accounts
Traditional and Roth IRAs
Traditional IRA Roth IRA
Who Can Individuals Individuals
Establish/ • The account owner (or the owner’s spouse, if married filing • The account owner (or the owner’s spouse, if married
Contribute jointly) must have compensation1 to contribute. filing jointly) must have compensation1 to contribute.
• No age restrictions apply.2 • Contributions are not allowed (or maximum allowable
contribution is reduced) for individuals with modified
adjusted gross income (AGI) in certain ranges.
• No age restrictions apply.
Deductibility • Potentially deductible. • Nondeductible.
• The deduction is reduced or eliminated at specified income
levels if account owner or owner’s spouse participates in an
employer-sponsored retirement plan.
• Nondeductible contributions are allowed.
Earnings • Tax-deferred. • Tax-deferred.
Withdrawals • Taxable (unless attributable to nondeductible contributions). • Tax-free after the account has been maintained for five
years and owner:
– Is age 59½ or older.
– Is paying first-time homebuying expenses ($10,000 lifetime
cap).
– Is permanently disabled.
– Has died and amount is paid to the beneficiary.
• Roth contributions generally may be withdrawn tax and
penalty-free at any time.
Traditional IRA — Maximum Deductible Contribution
For individuals covered by an employer-sponsored plan3
2021 2020
Modified AGI Younger than 50 50 or Older Modified AGI Younger than 50 50 or Older
Single $0 – $66,000 $6,000 $7,000 $0 – $65,000 $6,000 $7,000
More than $66,000, Partial Partial More than $65,000, Partial Partial
but less than $76,000 deduction deduction but less than $75,000 deduction deduction
$76,001 or more None None $75,001 or more None None
Married $0 – $105,000 $6,000 $7,000 $0 – $104,000 $6,000 $7,000
(Filing More than $105,000, Partial Partial More than $104,000, Partial Partial
Jointly)3 but less than $125,000 deduction deduction but less than $124,000 deduction deduction
$125,001 or more None None $124,001 or more None None
Roth IRA — Maximum Contribution
2021 2020
Modified AGI Younger than 50 50 or Older Modified AGI Younger than 50 50 or Older
Single $0 – $125,000 $6,000 $7,000 $0 – $124,000 $6,000 $7,000
More than $125,000, Partial Partial More than $124,000, Partial Partial
but less $140,000 contribution contribution but less than $139,000 contribution contribution
$140,000 or more None None $139,000 or more None None
Married $0 – $198,000 $6,000 $7,000 $0 – $196,000 $6,000 $7,000
(Filing More than $198,000, Partial Partial More than $196,000, Partial Partial
Jointly) but less than $208,000 contribution contribution but less than $206,000 contribution contribution
$208,000 or more None None $206,000 or more None None
1. Compensation includes taxable wages, salaries, tips, bonuses, commissions, self-employment income, taxable non-tuition fellowship, stipend payments, and
alimony and separate maintenance payments, as well as nontaxable combat pay received by members of the US Armed Forces.
2. The 70½ age restriction was lifted for tax years beginning after December 31, 2019.
3. Individuals filing a single return and not covered by a retirement plan at work may deduct the full contribution amount with no modified AGI restrictions. For a married
couple filing jointly, if both taxpayers are not covered by a retirement plan at work, the full contribution amount is deductible with no modified AGI restrictions. For a
married couple filing jointly where the IRA contributor is not an active participant in an employer-sponsored retirement plan and is married to someone who is an active
participant, the deduction is phased out if the couple’s income is between $198,000 and $208,000 in 2021, up from $196,000 and $206,000 in 2020.7
Retirement Plan Distribution Rules
Retirement Plan Distributions
Under 59½ Years of Age 59½ to 72 Years of Age Over 72 Years of Age
Traditional IRA/SEP/SIMPLE IRA
Tax • Taxed as ordinary income.1 • Taxed as ordinary income.1 • Taxed as ordinary income.1
Implications:
Withdrawal • 10% penalty on taxable portion of • None. • Failure to take any year’s full required
Penalties: distribution unless a penalty exception minimum distribution (RMD) will result in
applies. With a SIMPLE IRA, the penalty a 50% penalty on the amount that should
for early withdrawal is 25% during the have been withdrawn.
first two years of plan participation.
RMDs: • Not until age 72.2 • Not until age 72.2 • Yes, starting no later than April 1 of
the calendar year after the account
owner/participant turns 72,2 then by
December 31 each year thereafter.
Roth IRA
Tax • Contributions can be withdrawn • Contributions can be withdrawn • Contributions can be withdrawn tax-free.
Implications: tax-free. Ordinary income tax applies tax-free. Investment earnings can Investment earnings can be withdrawn
to investment earnings unless the be withdrawn tax-free as long as tax-free as long as the account has been
Roth IRA has been open for at least the account has been open for at open for at least five years from Jan. 1
five years and withdrawal is due to least five years from Jan. 1 of the tax of the tax year for which a contribution
death, disability or qualified first year for which a contribution was was first made.
home purchase. first made.
Withdrawal • No penalties on withdrawal of • None. • None.
Penalties: contributions. 10% penalty on
investment earnings withdrawn
unless a tax-free distribution or a
penalty exception applies.
RMDs: • None during lifetime of original owner. • None during lifetime of original owner. • None during lifetime of original owner.
Qualified Plan /403(b)/Governmental 457(b)
3
Tax • Depends on the type of plan, but • Generally taxed as ordinary income. • Generally taxed as ordinary income.
Implications: generally taxed as ordinary income.
Withdrawal • Qualified plan/403(b): 10% penalty on • None, but participant may be • Failure to take any year’s full RMD will
Penalties: amounts not rolled over to another required to separate from service result in a 50% penalty on the amount
plan within 60 days unless an early before withdrawals are allowed if the that should have been withdrawn.
withdrawal exception applies. plan does not allow for in-service
• 457(b): Generally no penalty4 withdrawals.
RMDs: • Not until age 72.2 • Not until age 72.2 • Yes, generally starting April 1 of the
calendar year following the later of the
year after participant turns 722 or the
calendar year in which the participant
retires from employment with the
employer maintaining the plan, then by
December 31 each year thereafter.5
Roth 401(k)/Roth 403(b)/Roth 457(b)
Tax • Ordinary income tax applies to • Distributions are tax-free with five • Distributions are tax-free with five tax
Implications: investment earnings unless employee tax years or more of Roth plan years or more of Roth plan participation.
has been a Roth participant for at least participation. If the five-year If the five-year requirement isn’t met,
five tax years and the distribution is requirement isn’t met, the amount the amount attributable to investment
due to death or disability. attributable to investment earnings earnings is subject to ordinary income tax.
is subject to ordinary income tax.
Withdrawal • 10% penalty on taxable amount unless • None. • Failure to take any year’s full RMD will
Penalties: an exception applies. result in a 50% penalty on any taxable
amount that should have been withdrawn.
RMDs: • Not until age 72.2 • Not until age 72.2 • Yes, generally starting April 1 of the
calendar year following the later of the
year after participant turns 722 or the
calendar year in which the participant
retires from employment with the
employer maintaining the plan, then by
December 31 each year thereafter.5
1. Any amounts withdrawn from a traditional IRA that represent nondeductible contributions are not subject to tax.
2. For years prior to 2020, RMDs began for the year the individual reached age 70½.
3. A retirement plan that meets the requirements of the Internal Revenue Code to qualify for tax-favored treatment (e.g., 401(k), profit-sharing, money purchase).
4. A 10% penalty could apply if the distribution from the 457(b) plan is attributable to funds rolled into the plan from a qualified plan and the distribution does
not qualify for another penalty exception.
5. Qualified plan individuals owning more than 5% of the company sponsoring the retirement plan must begin taking RMDs by April 1 of the calendar year following
the year they reach age 72, regardless of retirement status.8
Retirement Plan Distribution Rules (continued)
Distributions Not Subject to the 10% Early Withdrawal Penalty
IRA/SEP/SIMPLE IRA1/Qualified Plan/403(b) IRA/SEP/SIMPLE IRA1 Qualified Plan/403(b)
• On or after age 59½. • Qualified first-time homebuyer • After an employee’s separation from
• Death. expenses ($10,000 lifetime limitation). service where the separation occurs
• Permanent disability (as defined in the Internal • Qualified higher education expenses. during or after the year the employee
Revenue Code). • Payment of health insurance reaches age 55.
• Series of substantially equal periodic payments. premiums while unemployed • To an alternate payee under a qualified
• IRS levy on the IRA or plan. (requirements apply). domestic relations order (QDRO).
• Qualified reservist distribution.
• Unreimbursed medical expenses in excess of 7.5% of AGI.
• Birth or adoption expenses up to $5,000.
Substantially Equal Periodic Payments2
Distributions from a qualified plan, a 403(b) or an IRA before age 59½ are not subject to the 10% early withdrawal penalty if they consist of a
series of “substantially equal periodic payments” (SEPP) that satisfy Section 72(t) of the Internal Revenue Code. Payments must be taken
annually for at least five years or until age 59½, whichever is longer.
Calculating the Distribution Amount
IRS Approved Method Description Key Features
RMD • Divide the account balance for each year by the • Requires annual recalculation of the payment using the
appropriate life-expectancy factor from one of three updated account balance and life-expectancy factor.
IRS tables: • Of the three methods, the RMD method generally results
– Uniform Lifetime. in the lowest payment.
– Single Life Expectancy. • Annual changes to the payment amount are not
– Joint and Last Survivor. considered modifications of the SEPP arrangement.
• The same table must be used for all payment calculations.
Fixed Amortization • Amortize the account balance in the first year of • The payment is not recalculated after it is initially
payment using the life-expectancy factor from one determined — it remains the same each year.
of the IRS tables listed above and an interest rate. • Exception: The IRS allows the account owner to switch
• The interest rate can’t be more than 120% of the federal to the RMD method in any year after the first year
mid-term rate for either of the two months immediately provided the RMD method continues to be followed
preceding the month in which payments begin. in all later years.
Fixed Annuitization • Similar to the fixed amortization method, except that • The payment is not recalculated after it is initially
the life-expectancy factor (“annuity factor”) is taken determined — it remains the same each year.
from an IRS-approved mortality table. • Exception: The IRS allows the account owner to switch to
the RMD method in any year after the first year, provided
the RMD method continues to be followed in all later years.
RMD Calculation Upon Attaining Age 72
To find the current RMD, divide the adjusted balance of the account on December 31 of the previous year by the applicable divisor from the
IRS Uniform Lifetime Table. Use the account owner’s age on this year’s birthday. If the account owner’s spouse is the sole beneficiary of the IRA
and is more than 10 years younger than the owner, you may use a separate IRS table — Joint and Last Survivor — that addresses joint life
expectancy, which will result in a lower RMD.
IRS Uniform Lifetime Table
Age Applicable Divisor Age Applicable Divisor Age Applicable Divisor
72 25.6 82 17.1 92 10.2
73 24.7 83 16.3 93 9.6
74 23.8 84 15.5 94 9.1
75 22.9 85 14.8 95 8.6
76 22.0 86 14.1 96 8.1
77 21.2 87 13.4 97 7.6
78 20.3 88 12.7 98 7.1
79 19.5 89 12.0 99 6.7
80 18.7 90 11.4 100 6.3
81 17.9 91 10.8 101 5.9
1. The early distribution penalty is 25% (instead of 10%) during the first two years of SIMPLE IRA plan participation.
2. SEPPs are available to qualified plan and 403(b) participants only after severance from employment.9
Rollover and Transfer Rules
What Distributions What Distributions Rollover Options
Can Be Rolled Over/ Cannot Be Rolled Over/
Plan Type Transferred Transferred Direct Rollover Indirect Rollover Partial Rollover
Qualified/ • Any eligible distribution • RMDs. • Trustee-to-trustee • The plan must • A portion of the
403(b)/ that is not described • Corrective distributions transfer to an withhold 20% for distribution is
Govern- at right.1 of excess contributions eligible plan or IRA. federal income transferred or
mental or deferrals. • No tax or penalty in taxes, and the rolled over, and
457(b) • Hardship distributions. the year of the participant receives the participant
• Loans treated as rollover (unless the the net amount. keeps the remainder.
Contract Exchange distributions. rollover is to a Roth • To avoid tax and a • The amount not
• If permitted under the • Distributions that are part IRA or a designated potential 10% early transferred or rolled
plan, 403(b) partici- of a series of substantially Roth account in the distribution penalty, over is subject to
pants can move assets equal payments made at plan). the participant must tax and possibly
from one approved least annually over a deposit the full a 10% early
investment provider lifetime or a period of distribution withdrawal penalty.
to another within the 10 years or more. (including the 20%)
same plan. • Dividends on employer in an eligible plan
securities. or IRA within
• The cost of life insurance 60 days.
coverage.
Traditional • Any distribution to the • Amounts representing • Trustee-to-trustee • The IRA owner • A portion of the
IRA/SEP/ account owner or the nondeductible contri- transfer to an eligible receives the distribution is
SIMPLE IRA owner’s surviving butions to a traditional retirement plan distribution and transferred or
spouse (who inherited IRA cannot be rolled or IRA. deposits it in an rolled over, and
the IRA) that would be into a qualified/403(b)/ • No tax or penalty eligible plan or IRA the IRA owner
taxable if it is not rolled Governmental 457(b) plan. in the year of the within 60 days. keeps the remainder.
over or transferred to • RMDs. rollover (unless • No tax or penalty • The amount not
another plan or IRA • Corrective distributions the rollover is to in the year of the transferred/rolled
(but only one 60 day of excess contributions. a Roth IRA). rollover (unless over is subject to
rollover is allowed • Distributions that are part the rollover is to tax and possibly a
from the owner’s of a series of substantially a Roth IRA). 10% early withdrawal
aggregate IRAs in a equal periodic payments penalty.
one-year period). under Section 72(t) of the
Internal Revenue Code.
• Any distribution made
within one year of another
distribution that was rolled
over from the account
owner’s aggregate IRAs.
• Any distribution to a
non-spouse beneficiary
who inherited the IRA.
Roth IRA • Generally, any • Any distribution made • Trustee-to-trustee • The Roth IRA • A portion of the
distribution to the within one year of another transfer to another owner receives the distribution is
account owner or the distribution that was Roth IRA. distribution and transferred or rolled
owner’s surviving rolled over from the • No tax or penalty deposits it in a Roth over to another Roth
spouse (only one 60 account owner’s in the year of the IRA within 60 days. IRA, and the account
day rollover is allowed aggregate IRAs. rollover. • No tax or penalty owner keeps the
from the owner’s • Any distribution to a in the year of the remainder.
aggregate IRAs within non-spouse beneficiary rollover. • Any earnings amount
a one-year period).2 of the Roth IRA. • The five-year period that is not rolled
used to determine over is potentially
qualified distributions subject to tax and
doesn’t change. a 10% early with-
drawal penalty
(unless distribution
is qualified).
Source: IRS Publication 590-B. IRA distributions are explained in Publication 590-B.
1. A distribution to a non-spouse designated beneficiary of a deceased employee will be treated as an eligible rollover distribution only if it is directly transferred to a
traditional or Roth IRA established to receive the distribution.
2. There is also a prohibition on making another tax-free rollover from the IRA that received the rollover contribution within the same one-year period.10
Rollover and Transfer Rules (continued)
Moving Money Between Plans
Roll to
Qualified Designated Roth
Traditional SIMPLE 457(b) Plan1 403(b) Account (401(k),
Roll From Roth IRA IRA IRA SEP (government) (pretax) (pretax) 403(b), or 457(b))
Roth IRA Yes 2
No No No No No No No
Traditional IRA Yes3 Yes2 Yes2,7 Yes2 Yes4 Yes Yes No
(after 2 years)
SIMPLE IRA Yes3 Yes2 Yes2 Yes2 Yes4 Yes Yes No
(after 2 years) (after 2 years) (after 2 years) (after 2 years) (after 2 years) (after 2 years)
SEP Yes3 Yes2 Yes2,7 Yes2 Yes4 Yes Yes No
(after 2 years)
457(b) Yes3 Yes Yes7 Yes Yes Yes Yes Yes3,5
(Government) (after 2 years)
Qualified Plan1 Yes3 Yes Yes7 Yes Yes4 Yes Yes Yes3,5
(pretax) (after 2 years)
403(b) (pretax) Yes3 Yes Yes7 Yes Yes4 Yes Yes Yes3,5
(after 2 years)
Designated Roth Yes No No No No No No Yes6
Account (401(k),
403(b), or 457(b))
Source: IRS Publication 590-A
Federal Tax Rates and Schedules
2021: Single Filers
Tax Rate Taxable Income Bracket Tax Owed
10% $0 to $9,950 10% of taxable income
12% $9,951 to $40,525 $995 plus 12% of the amount over $9,950
22% $40,526 to $86,375 $4,664 plus 22% of the amount over $40,525
24% $86,376 to $164,925 $14,751 plus 24% of the amount over $86,375
32% $164,926 to $209,425 $33,603 plus 32% of the amount over $164,925
35% $209,426 to $523,600 $47,843 plus 35% of the amount over $209,425
37% $523,601 or more $157,804.25 plus 37% of the amount over $523,600
2020: Single Filers
Tax Rate Taxable Income Bracket Tax Owed
10% $0 to $9,875 10% of the amount over $0
12% $9,876 to $40,125 $987.50 plus 12% of the amount over $9,875
22% $40,126 to $85,525 $4,617.50 plus 22% of the amount over $40,125
24% $85,526 to $163,300 $14,605.50 plus 24% of the amount over $85,525
32% $163,301 to $207,350 $33,271.50 plus 32% of the amount over $163,300
35% $207,351 to $518,400 $47,367.50 plus 35% of the amount over $207,350
37% $518,401 or more $156,235 plus 37% of the amount over $518,400
1. Qualified plans include, for example, profit-sharing, 401(k), money purchase and defined benefits plans.
2. Only one rollover in any 12-month period.
3. Must include in income.
4. Must have separate accounts.
5. Must be an in-plan rollover.
6. Any nontaxable amounts distributed must be rolled over by direct trustee-to-trustee transfer.
7. Applies to rollover contributions after December 18, 2015.11 Federal Tax Rates and Schedules (continued) 2021: Married Filing Jointly or Qualifying Widow(er) Tax Rate Taxable Income Bracket Tax Owed 10% $0 to $19,900 10% of taxable income 12% $19,901 to $81,050 $1,990 plus 12% of the amount over $19,900 22% $81,051 to $172,750 $9,328 plus 22% of the amount over $81,050 24% $172,751 to $329,850 $29,502 plus 24% of the amount over $172,750 32% $329,851 to $418,850 $67,206 plus 32% of the amount over $329,850 35% $418,851 to $628,300 $95,686 plus 35% of the amount over $418,850 37% $628,301 or more $168,993.50 plus 37% of the amount over $628,300 2020: Married Filing Jointly or Qualifying Widow(er) Tax Rate Taxable Income Bracket Tax Owed 10% $0 to $19,750 10% of taxable income 12% $19,751 to $80,250 $1,975 plus 12% of the amount over $19,750 22% $80,251 to $171,050 $9,235 plus 22% of the amount over $80,250 24% $171,051 to $326,600 $29,211 plus 24% of the amount over $171,050 32% $326,601 to $414,700 $66,543 plus 32% of the amount over $326,600 35% $414,701 to $622,050 $94,735 plus 35% of the amount over $414,700 37% $622,051 or more $167,307.50 plus 37% of the amount over $622,050 2021: Head of Household Tax Rate Taxable Income Bracket Tax Owed 10% $0 to $14,200 10% of taxable income 12% $14,201 to $54,200 $1,420 plus 12% of the amount over $14,200 22% $54,201 to $86,350 $6,220 plus 22% of the amount over $54,200 24% $86,351 to $164,900 $13,293 plus 24% of the amount over $86,350 32% $164,901 to $209,400 $32,145 plus 32% of the amount over $164,900 35% $209,401 to $523,600 $46,385 plus 35% of the amount over $209,400 37% $523,601 or more $156,355 plus 37% of the amount over $523,600 2020: Head of Household Tax Rate Taxable Income Bracket Tax Owed 10% $0 to $14,100 10% of taxable income 12% $14,101 to $53,700 $1,410 plus 12% of the amount over $14,100 22% $53,701 to $85,500 $6,162 plus 22% of the amount over $53,700 24% $85,501 to $163,300 $13,158 plus 24% of the amount over $85,500 32% $163,301 to $207,350 $31,830 plus 32% of the amount over $163,300 35% $207,351 to $518,400 $45,926 plus 35% of the amount over $207,350 37% $518,401 or more $154,793.50 plus 37% of the amount over $518,400
12
Federal Tax Rates and Schedules (continued)
2021: Married Filing Separately
Tax Rate Taxable Income Bracket Tax Owed
10% $0 to $9,950 10% of taxable income
12% $9,951 to $40,525 $995 plus 12% of the amount over $9,950
22% $40,526 to $86,375 $4,664 plus 22% of the amount over $40,525
24% $86,376 to $164,925 $14,751 plus 24% of the amount over $86,375
32% $164,926 to $209,425 $33,603 plus 32% of the amount over $164,925
35% $209,426 to $314,150 $47,843 plus 35% of the amount over $209,425
37% $314,151 or more $84,496.75 plus 37% of the amount over $314,150
2020: Married Filing Separately
Tax Rate Taxable Income Bracket Tax Owed
10% $0 to $9,875 10% of taxable income
12% $9,876 to $40,125 $987.50 plus 12% of the amount over $9,875
22% $40,126 to $85,525 $4,617.50 plus 22% of the amount over $40,125
24% $85,526 to $163,300 $14,605.50 plus 24% of the amount over $85,525
32% $163,301 to $207,350 $33,271.50 plus 32% of the amount over $163,300
35% $207,351 to $311,025 $47,367.50 plus 35% of the amount over $207,350
37% $311,026 or more $83,653.75 plus 37% of the amount over $311,025
2021: Capital Gains
Long-Term Capital Gains Tax Rates (longer than 12 months)1
Taxable Income
Single Married Joint Married Separately Head of Household
0% $0 – $40,400 $0 – $80,800 $0 – $40,400 $0 – $54,100
15% $40,401 – $445,850 $80,801 – $501,600 $40,401 – $250,800 $54,101 – $473,750
20% $445,851 or more $501,601 or more $250,801 or more $473,751 or more
Short-term capital gains (12 months or less) are taxed at ordinary income tax rates.
2020: Capital Gains
Long-Term Capital Gains Tax Rates (longer than 12 months)1
Taxable Income
Single Married Filing Jointly Married Separately Head of Household
0% $0 – $40,000 $0 – $80,000 $0 – $40,000 $0 – $53,600
15% $40,001 – $441,450 $80,001 – $496,600 $40,001 – $248,300 $53,601 – $469,050
20% $441,451 or more $496,001 or more $248,301 or more $469,051 or more
Short-term capital gains (12 months or less) are taxed at ordinary income tax rates.
2021: Retirement Savers Credit
Credit All Other Filers2 Married Filing Jointly Head of Household
50% AGI $19,750 or less AGI $39,500 or less AGI $29,625 or less
20% $19,751 – $21,500 $39,501 – $43,000 $29,626 – $32,250
10% $21,501 – $33,000 $43,001 – $66,000 $32,251 – $49,500
0% $33,001 or more $66,001 or more $49,5001 or more
1. Some investors may owe an additional 3.8% of their net investment income, or the amount by which their modified adjusted gross income exceeds the statutory
threshold amount based on their filing status. (Single or head of household – $200,000, Married filing jointly — $250,000, Married filing separately — $125,000).
2. Single, married filing separately, or qualifying widow(er).13
Federal Tax Rates and Schedules (continued)
2020: Retirement Savers Credit
Credit All Other Filers1 Married Filing Jointly Head of Household
50% AGI $19,500 or less AGI $39,000 or less AGI $29,250 or less
20% $19,501 – $21,250 $39,001 – $42,500 $29,251 – $31,875
10% $21,251 – $32,500 $42,501 – $65,000 $31,876 – $48,750
0% $32,501 or more $65,001 or more $48,751 or more
Standard Deduction
Filing Status 2021 2020
Single, Married filing separately $12,550 $12,400
Married filing jointly $25,100 $24,800
Head of household $18,800 $18,650
Health Savings Accounts (HSAs)
2021 2020
Self coverage, individuals under age 55 $3,600 $3,550
Family coverage $7,200 $7,100
Catch-up contributions at age 55 $1,000 $1,000
Out-of-Pocket Spending of HSA-Compatible HDHPs1 2021 2020
Self coverage $7,000 $6,900
Family coverage $14,000 $13,800
Minimum Deductible Amounts for HSA-Compatible HDHPs 2021 2020
Self coverage $1,400 $1,400
Family coverage $2,800 $2,800
Social Security Benefits
Determine Your Full Retirement Age
Year of Birth Full Retirement Age Year of Birth Full Retirement Age
1943 – 1954 66 1958 66 and 8 months
1955 66 and 2 months 1959 66 and 10 months
1956 66 and 4 months 1960+ 67
1957 66 and 6 months
Delayed Retirement Benefits Cost of Living Adjustments (COLA)
Year of Birth Yearly Increase to Age 70 Year Percentage
1941 – 1942 7.50% 2021 1.30%
1943 – later 8% 2020 1.60%14
Social Security Benefits (continued)
State Taxation of Social Security Benefits
Tax some or all SS benefits (13 states) CO, CT, KS, MN, MO, MT, NE, NM, ND, RI, UT, VT, WV
No state tax (9 states) AK, FL, NV, NH, SD, TN, TX, WA, WY
All other states (29) exclude SSB from taxation AL, AR, AZ, CA, DC, DE, GA, HI, ID, IL, IN, IA, KY, LA, ME, MD, MA, MI, MS, NJ, NY, NC,
OH, OK, OR, PA, SC, VA, WI
Who Is Entitled to Your Benefits Once You’re Eligible
Who Eligibility Benefit*
Spouse • 62 or older. • Eligible for 50% of your full benefit at FRA, reduced
• Any age if caring for your child who is under 16 or if taken prior.
disabled and also receiving benefits on your record. • Upon your death, surviving spouse can receive 100%
• 60 or older (50 or older if disabled) upon your death. of your at FRA, no less than 71.5% if taken earlier.
Child • Any age if caring for your child who is under 16 or • Can receive 50% of your full benefit.
disabled and also receiving benefits on your record. • Upon your death, surviving children can receive 75%
• Under age 18 (or is 18 – 19 if in high school full time. of your benefit.
• Any age if disabled before age 22.
Ex-Spouse • Age 62 or older. • Can receive 50% of your full benefit at FRA, reduced
• Married to you for at least 10 years. if taken FRA, even if you have not filed, if both of you
• Not currently married. are at least 62 and divorced at least two years.
• 60 or older (50 or older if disabled) upon your death. • Entitled to same survivor benefits as current spouse.
Types of Social Security Benefits
Retirement • Workers who have worked for a sufficient number of years are eligible for retirement at age 62. • Taxable
Survivor • If you are the surviving spouse or minor child of a worker who qualified for Social Security • Taxable
retirement.
Disability • If you haven't reached retirement age but have met the work requirements and are • Taxable
considered disabled under the Social Security Administration (SSA) program's medical
guidelines.
Supplemental • Monthly benefits are paid to people with limited income and resources who are disabled, • Not Taxable
Security Income (SSI) blind, or age 65 or older.
• Blind or disabled children may also get SSI.
Lump-Sum Death • Paid ($255) to a living with surviving spouse or minor/disabled children only. • Not Taxable
Benefit • File Form SSA-8.
*Earnings limits, family limits and Windfall Elimination Provisions apply.15
Medicare Benefits
Medicare: Federal Health Insurance for Retirees
Covered Not Covered Notes
Medicare Part A – • Inpatient Hospital Care. • Long-term care, such • Most people are automatically enrolled in Part A
Hospital Insurance • Skilled Nursing Facility. as nursing homes or at age 65 if they have:
• Hospice. long-term facilities. – Worked at least 10 years.
• Home Health Care. – Paid Medicare taxes while working.
• Medicare Part A coverage is typically premium-free
but may also come with other costs, including:
– Deductibles.
– Co-insurance.
– Co-payments.
Medicare Part B – • Doctor Visits. • Prescription drug • Unlike Part A, most people will pay a monthly
Outpatient Medical • Lab Testing. coverage. This is premium for Part B. That premium will vary from
Insurance • Ambulance Services. covered under Part D. year to year and depend on individual situations.
• Preventative Care. • Medical equipment • Other costs related to your Medicare Part B
• Mental Health Care. obtained through a coverage may include:
• Drug coverage that supplier not affiliated – Deductible.
must be administered with Medicare. – Co-insurance.
by a doctor. – Co-payments.
• Costs vary depending on the type of service or
item requested.
Medicare Advantage • Dental Care.
(Part C) – Alternative to • Hearing Care.
Original Medicare from • Prescription Drug Coverage.
a private insurer • Vision Services and Care.
• Additional Benefits not
covered by Medicare A or B.
Medicare Part D – • Original Medicare offers • Original Medicare beneficiaries can sign up for
Prescription Drug limited prescription drug Medicare Part D prescription drug coverage
Insurance benefits. Fills the gap in through a separate Medicare Prescription Drug Plan.
prescription drug coverage • These plans provide for stand-alone prescription
left by Medicare Parts A drug benefits. Individuals still need to stay
and B. enrolled in Part A and/or Part B for their hospital
and medical coverage.
• Individuals who opt for Medicare Advantage can
get Medicare Part D coverage through a
Medicare Advantage Prescription Drug plan.
The convenience of these plans is that they
provide all of your Medicare Part A, Part B, and
Part D benefits under a single plan.
Medicare Supplemental • Deductibles. • Prescription drug
Insurance (aka Medigap) • Premiums. coverage.
Private insurance companies • Co-payments.
that cover costs not covered • Travel Care Coverage.
by Original Medicare
Source: Medicare & You 2021 - The official U.S. Government Medicare Handbook.
Comparing Medicare Advantage and Medicare Supplement Plans
Does it cover Medicare’s Does it let you see any doctor Does it include additional
out-of-pocket costs, such as you choose who accepts Does it include prescription coverage, such as routine
Feature deductibles and coinsurance? Medicare assignment? drug coverage? dental or vision services?
Medicare • Yes. Different plans may • Yes, lets you see any • No, unless you still have • Standard benefits don’t
Supplement – cover different portions doctor you choose a previously purchased include this coverage,
Medigap of certain out-of-pocket who accepts Medicare plan that included this although some insurance
costs. Some plans may not assignment with most coverage). companies may offer
cover Medicare deductibles. plans. additional benefits.
Medicare • Plans set their own • Many plans have provider • Yes, with most plans. • Yes, with some plans.
Advantage – coinsurance and networks you must use
Part C deductible amounts. or else pay higher out-of-
pocket costs for your
medical services.This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions. This brochure is not intended to be legal or tax advice or to offer a comprehensive resource for tax-qualified retirement plans, Health Savings Accounts, or other government benefits. The tax information contained herein is general and is not exhaustive by nature. Federal and state tax laws are complex and constantly changing. State laws may differ. Always consult your own legal or tax professional for information concerning your individual situation. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. This is not to be construed as an offer to buy or sell any financial instruments and should not be relied upon as the sole factor in an investment-making decision. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Invesco representatives are not tax advisors. All data provided by Invesco unless otherwise noted. All data as of 2/1/21 unless otherwise noted. invesco.com/us RRET-BRO-1 05/21 Invesco Distributors, Inc. NA4541
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