Insights

IRS Increases 401(k) and IRA Contribution Limits

The Internal Revenue Service will be increasing the amount that individuals can contribute to their 401(k) plans in 2024 to $23,000, up from $22,500 for 2023, while also pushing up the limit for individual retirement accounts to $7,000, as part of its annual cost-of-living adjustments while inflation continues to rise, with some new wrinkles reflecting changes in the SECURE 2.0 Act.

The contribution limit isn’t only going up for 401(k) and IRA plans, but for others as well. For employees who participate in 401(k), 403(b) and most 457 plans, along with the federal government’s Thrift Savings Plan, the limit is rising to $23,000, up from $22,500.

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 Thrift Savings Plan remains $7,500 for 2024. Therefore, participants in those plans who are 50 and older can contribute up to $30,500, starting in 2024. The catch-up limit for employees who are 50 and over who participate in SIMPLE plans will stay at $3,500 for 2024.

The income ranges for determining eligibility to make deductible contributions to traditional IRAs, to contribute to Roth IRAs, and to claim the Saver’s Credit have all increased for 2024.Taxpayers are able to deduct contributions to a traditional IRA if they meet specific conditions. If during the course of 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’s 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:

• For single taxpayers covered by a workplace plan, the phase-out is rising to between $77,000 and $87,000, up from between $73,000 and $83,000.
• For married couples who file jointly, if the spouse making the IRA contribution is covered by a workplace plan, the phase-out is increased to between $123,000 and $143,000, up from between $116,000 and $136,000.
• For an IRA contributor who’s not covered by a workplace plan and is married to someone who is covered, the phase-out is increased to between $230,000 and $240,000, up from between $218,000 and $228,000.
• For a married individual filing a separate return who’s covered by a workplace plan, the phase-out is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

The income phase-out range for taxpayers making contributions to a Roth IRA has 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.

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, which is 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.

The amount individuals can contribute to their SIMPLE accounts has increased to $16,000, up from $15,500.

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The information presented here should not be construed as legal, tax, accounting, or valuation advice. No one should act on such information without appropriate professional advice and after a thorough examination of the particular situation.