The Internal Revenue Service (IRS) has announced increased contribution limits for 401(k) plans and other retirement accounts for the year 2024. If you’re planning your retirement savings strategy, it’s crucial to understand these updated limits to maximize your potential savings and take full advantage of tax benefits.
Increased 401(k) Contribution Limit for 2024
For 2024, the employee contribution limit for 401(k), 403(b), and most 457 plans, as well as the federal government’s Thrift Savings Plan, has been raised to $23,000. This is an increase from the $22,500 limit in 2023. This adjustment allows individuals to save more through their employer-sponsored retirement plans.
Catch-Up Contributions for Those 50 and Over
If you’re age 50 or older, you’re eligible to make “catch-up” contributions, allowing you to save even more for retirement. The catch-up contribution limit for 401(k), 403(b), and most 457 plans remains at $7,500 for 2024. Therefore, participants aged 50 and over can contribute a total of $30,500 to these plans in 2024.
Other Retirement Plan Contribution Limits for 2024
Besides 401(k) plans, the IRS has also adjusted the contribution limits for other retirement savings options:
- IRA: The limit on annual contributions to an IRA has increased to $7,000, up from $6,500.
- SIMPLE plans: The amount individuals can contribute to their SIMPLE retirement accounts is increased to $16,000, up from $15,500.
IRA Deduction Phase-Out Ranges for 2024
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. Here are the phase‑out ranges for 2024:
- Single taxpayers covered by a workplace retirement plan: phase-out range is increased to between $77,000 and $87,000, up from between $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 increased to between $123,000 and $143,000, up from between $116,000 and $136,000.
- IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered: phase-out range is increased to between $230,000 and $240,000, up from between $218,000 and $228,000.
- Married individual filing a separate return who is covered by a workplace retirement plan: the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
Roth IRA Income Phase-Out Ranges for 2024
The income phase-out range for taxpayers making contributions to a Roth IRA is increased to between $146,000 and $161,000 for singles and heads of household, up from between $138,000 and $153,000. For married couples filing jointly, the income phase-out range is increased to between $230,000 and $240,000, up from between $218,000 and $228,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
Saver’s Credit Income Limits for 2024
The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $76,500 for married couples filing jointly, up from $73,000; $57,375 for heads of household, up from $54,750; and $38,250 for singles and married individuals filing separately, up from $36,500.
SECURE 2.0 Act Adjustments
Several changes were made under SECURE 2.0 are as follows:
- The limitation on premiums paid with respect to a qualifying longevity annuity contract to $200,000. For 2024, this limitation remains $200,000.
- Added an adjustment to the deductible limit on charitable distributions. For 2024, this limitation is increased to $105,000, up from $100,000.
- Added a 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. For 2024, this limitation is increased to $53,000, up from $50,000.
Planning Your Retirement Savings
Understanding the 401(k) and other retirement account contribution limits for 2024 is essential for effective retirement planning. Consider adjusting your savings strategy to take advantage of these increased limits and maximize your retirement nest egg. Consult with a financial advisor to determine the best approach for your individual circumstances.
