The federal estate tax exemption may be lowered, which means it may be time to think about steps you can take to keep your estate from being taxed. An irrevocable life insurance trust will allow you to pass on money to your heirs while avoiding both the federal estate tax, as well as any applicable state estate tax.
Social Security Benefits
If you receive Social Security or SSI, you likely have already noticed that your check is slightly larger this year. The Social Security Administration provided a 1.3% cost-of-living adjustment (COLA) for benefit payments, which brings the federal SSI payment to $794. In addition, the amount that workers can earn before losing their eligibility for disability based on their work has increased to $1,310 for non-blind individuals.
Employee contribution limits will remain unchanged next year. The IRS isn’t increasing employee contribution limits for 401(k)s or flexible spending accounts for 2021.
Limits will remain the same with employees being able to defer up to $19,500 into a 401(k), 403(b) and most 457 plans at work. The limits also remain the same for employee catch-up contributions for those 50 and older, at $6,500. Last year saw a $500 jump in the overall employee contribution limit for 2020 plus a $500 rise in the catch-up limit.
For 2021, the dollar limit for employee contributions to flexible spending accounts, made pretax through salary reductions, remains unchanged at $2,750. However, for health FSA plans that permit the carryover of unused amounts, the maximum carryover amount for 2021 is $550, an increase of $50 from the original 2020 carryover limit.