The Internal Revenue Service (IRS) has announced increased contribution limits for 401(k) plans and other retirement-related accounts for the 2024 tax year. This provides an opportunity for individuals to boost their retirement savings. Understanding these changes is crucial for effective financial planning.
401(k), 403(b), and 457 Plan Contribution Limits for 2024
For employees participating in 401(k), 403(b), and most 457 plans, as well as the federal government’s Thrift Savings Plan, the contribution limit has increased to $23,000 in 2024, a rise from $22,500 in 2023. This increase allows individuals to save an additional $500 pre-tax towards their retirement.
IRA Contribution Limits for 2024
The limit on annual contributions to an Individual Retirement Account (IRA) has also increased to $7,000, up from $6,500. The IRA catch-up contribution limit for individuals aged 50 and over remains at $1,000 for 2024.
Catch-Up Contributions for Those 50 and Over
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), and most 457 plans, as well as the federal government’s Thrift Savings Plan, remains at $7,500 for 2024. This means participants in these plans who are 50 and older can contribute up to $30,500 starting in 2024 ($23,000 + $7,500). The catch-up contribution limit for employees 50 and over who participate in SIMPLE plans remains $3,500 for 2024.
Income Ranges for IRA Deductibility
Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2024:
- Single taxpayers covered by a workplace retirement plan: phase-out range is between $77,000 and $87,000 (up from $73,000 and $83,000).
- Married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan: phase-out range is between $123,000 and $143,000 (up from $116,000 and $136,000).
- For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered: the phase-out range is between $230,000 and $240,000 (up from $218,000 and $228,000).
- For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range remains between $0 and $10,000.
Roth IRA Income Phase-Out Ranges
The income phase-out range for taxpayers making contributions to a Roth IRA is also increasing:
- Singles and heads of household: between $146,000 and $161,000 (up from $138,000 and $153,000).
- Married couples filing jointly: between $230,000 and $240,000 (up from $218,000 and $228,000).
The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA remains between $0 and $10,000.
:max_bytes(150000):strip_icc()/dotdash_Final_What_Is_a_Roth_IRA_Sept_2020-01-4778101dd5a84b16a1992633a564c00.jpg)
Saver’s Credit Income Limits
The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers has also increased:
- Married couples filing jointly: $76,500 (up from $73,000).
- Heads of household: $57,375 (up from $54,750).
- Singles and married individuals filing separately: $38,250 (up from $36,500).
SIMPLE Retirement Account Contribution Limits
The amount individuals can contribute to their SIMPLE retirement accounts is increased to $16,000, up from $15,500.
Additional Changes Under SECURE 2.0
Several additional changes were made under the SECURE 2.0 Act:
- The limitation on premiums paid with respect to a qualifying longevity annuity contract remains at $200,000 for 2024.
- The deductible limit on charitable distributions is increased to $105,000, up from $100,000.
- The deductible limit for a one-time election to treat a distribution from an individual retirement account made directly by the trustee to a split-interest entity is increased to $53,000, up from $50,000.
Maximizing Your Retirement Savings
These increased contribution limits provide a valuable opportunity to increase your retirement savings. Consult with a financial advisor to determine the best strategies for your individual circumstances and make the most of these changes. Consider how much can you contribute to your 401(k) and other retirement accounts to secure your financial future. Remember to review IRS Notice 2023-75 for detailed information.
