Chevron Employees Can Save MORE in the Employee Savings Investment Plan

The IRS has recently released the 2020 retirement plan contribution limits. For super-savers at Chevron,  this is great news. Chevron employees can now contribute $19,500 (or $26,000 for those over 50 years old) of pre-tax or Roth savings to the Chevron Employee Savings Investment Plan and can get $70,500 of retirement savings into tax-efficient vessels in 2020.

Chevron’s limit on after-tax contributions has increased to $14,700, which means employees can contribute up to $34,200 (or $40,700 for those over 50 years old) between pre-tax and non-Roth after-tax savings to their Chevron 401(k).

How Chevron Employees Can Make Tax-Efficient Retirement Plan Contributions

If you are contributing after-tax dollars to the Chevron ESIP, consider rolling out the after-tax funds to a Roth IRA at the tail end of the third quarter to take advantage of the mega backdoor Roth strategy. For many Chevron employees that are contributing after-tax, the end of the third quarter is the best time to do the roll-out because the Chevron ESIP freezes all contributions to the plan for 90 days afterward.

 

2020 retirement savings contribution limits-Chevron

 

2020 Annual Compensation Limits and Strategic Saving for Chevron Employees

The annual compensation limit for 2020 has increased from $280,000 to $285,000. If you make more than $285,000 in base and bonus compensation for 2020, remember to ensure that you max out your ESIP contributions before earning $285,000 of income. After you earn $285,000 of income, you can no longer contribute to the Employee Savings Investment Plan.

Chevron offers up to an 8% contribution to employee 401(k) accounts. Since the annual compensation limit for 2020 is now $285,000, Chevron will now cap out contributions to the ESIP at $22,800. In 2020, once you begin making more than $285,000, Chevron will be making their contributions to the Employee Savings Restoration Plan (ESIP RP) instead of the Employee Savings Investment Plan. If 2020 is the first year you expect to make over $285,000, check that you have an allocation and investment strategy set up for your ESIP RP.

In addition, many Chevron employees will be able to take advantage of the backdoor Roth savings strategy. Since the IRA contribution limit for 2020 is $6,000 (and $7,000 for those over 50 years old), super-savers at Chevron can put away $40,200 (or $47,700 for those over 50 years old) between the 401(k) and backdoor Roths into tax-preferred retirement accounts.

The 2020 limit adjustments will be advantageous for super-savers at Chevron and it is important to be sure that you make the most of these changes.

At Willis Johnson & Associates, we work with our clients to ensure they get the full 8% company contribution, take advantage of backdoor Roth IRAs to ensure they are on track for success, and facilitate after-tax roll-outs from the Employee Savings Investment Fund to get the maximum amount of savings. If you have any questions about the 2020 contribution and compensation limits, please contact your advisor, or schedule a free consultation with one of our Chevron specialists.

 

 

Willis Johnson & Associates is a registered investment advisor. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Corporate benefits may change at any point in time. Be sure to consult with human resources and review Summary Plan Description(s) before implementing any strategy discussed herein. Willis Johnson & Associates is not a CPA firm.