401(k) and IRA Contribution Limits Increased

November 2023

The IRS announced that the amount individuals under age 50 can contribute to their 401(k), 403(b), most 457 and the federal government's Thrift Savings Plan accounts…all increased to $23,000 for 2024…a $500 bump over 2023 limits. Contribution limits to retirement plans are based on the inflation rate which slowed in 2023.

Notably, taxpayers 50 and older win a further concession … a $500 boost to sock away up to $30,500 annually. That number includes a $7,500 so-called catch-up contribution.

That means participants in qualifying plans can enjoy a 2024 tax cut by increasing the amount they contribute pre-tax to retirement accounts.

Here’s a summary of the key provisions of the changes for 2024:

IRA – Annual Contribution Limits

• Increased to $7,000 from $6,500
• Participants 50 and older can make an additional $1,000 catch-up contribution.

Note: You can’t make a tax-deductible contribution to an IRA unless you have no workplace retirement plan, or your income is below certain limits. For 2024, the deduction will phase out for single taxpayers earning between $77,000 and $87,000 (up from $73,000 to $83,000)…and for married couples filing jointly earning $123,000 to $143,000 (up from $116,000 and $136,000 respectively).

If your spouse is covered by a workplace plan and you’re not, your deduction for an IRA phases out between $230,000 and $240,000 in 2024, up from $218,000 to $228,000 in 2023.

Roth IRA – Annual Contribution Limits

• Increased to $7,000 from $6,500
• Participants 50 and older can make an additional $1,000 catch-up contribution.

Note: The income phase-out for contributions to a Roth IRA for singles and heads of household will be $146,000 to $161,000 respectively in 2024, up from $138,000 to $153,000. For married couples filing jointly, the phase-out range will be $230,000 to $240,000, up from $218,000 to $228,000 this year.

Simple IRA Accounts – Annual Contribution Limits

• Increased to $16,500, up from $15,500
• If the Plan permits, employee participants 50 and older can make an additional $3,500 catch-up contribution, up from $3,000 in 2023.

401(k) Plans – Annual Contribution Limits

• Employees under age 50 - $23,000, up from $22,500 in 2023.
• Employees 50 and older - $30,500 (Includes $7,500 catch-up contribution)
• If the Plan permits, additional after-tax employee contributions may be made.

Saver’s Credit

Low and moderate-income workers may add to their retirement fund value via federal tax credits that deliver a 100% reduction in the taxpayer’s tax-bill. Eligible workers may enjoy a tax credit in a range of 10% to 50% of contributions made to an IRA or employer sponsored retirement plan.

Note: The credit gradually reduces and phases out as a taxpayer’s income rises. In 2024, the credit will phase out at $76,500 for married couples filing joint tax returns (up from $73,000); $38,250 for singles and couples filing separately (up from $36,500); and $57,375 for heads of household (up from $54,750).

SEP IRAs – Annual Contribution Limits
(Self-employed & Small Business Owners)

• Increased to $69,000 based on 2023 inflation
• Self-employed persons may contribute up to 20% of earnings up to $345,000, up from $330,000.

The above presentation is meant as an overview only.
Give us a call and we’ll quickly help you determine
how you may qualify and for how much.