You can contribute a little more to your retirement plans next year. Every year, the IRS decides what the retirement account contribution limits will be for the upcoming year as well as what the income thresholds will be for qualifying for their tax advantages.
401k, 403b, and 457 Updates
The IRS announced workers can contribute up to $23,000 annually to their $401(k) plans in 2024, which is a $500 increase from the previous limit of $22,500. The new contribution limit also applies to 403(b) plans and some 457 plans as well.
There is still a $7,500 catch-up contribution that account owners over the age of 50 can contribute in addition to the $23,000 limit bringing their maximum limit to $30,500.
401(k) contribution limits 2023 & 2024
IRA Updates
The annual contribution limits for IRAs will be set at $7,000 for 2024, also a $500 increase from the previous year’s limit. There is still a $1,000 catch-up contribution that account owners over the age of 50 can contribute in addition to the $7,000 limit. The deadline for making the contribution is the tax deadline for the year you are contributing to. For example, you can still donate until April 15th, 2024 for your 2023 tax year contributions.
IRA contribution limits 2023 & 2024
There is also an increase to the income limitations to deduct traditional IRA contributions or to be able to contribute to a Roth IRA. Everyone with earned income can contribute to an IRA. However, if you earn more than the income threshold, you will not be able to take a tax deduction for the contribution. In 2024, single taxpayers cannot earn more that $87,000 and married couples filing jointly cannot earn more than $143,000 in order to get the tax deduction.
In order to be able to contribute to a Roth IRA, the restrictions are:
- Single / head of household tax filers can contribute with incomes as high as $146,000. Then the ability to contribute phases out and then is capped at $161,000 or higher.
- Married couples filing jointly can contribute with income as high as $230,000 and then is phased out and capped at $240,000.
If you have a SIMPLE IRA account, then the 2024 contribution limit is going up to $16,000 from $15,000. And the catch-up contribution is still $3,500 for those over the age of 50.
Get Saving
This increase in the contribution limit is welcomed news for employees who are looking to maximize their retirement savings. Retirement plans serve as a valuable tax-advantaged way to save for the future.
IMPORTANT NOTE: Know your contributions limits to avoid a double tax on your excess contributions. If you contribute more than the IRS allows you to contribute for that year, you will have to report that amount as taxable income AND then you will pay Federal taxes on that money when you withdraw it in retirement meaning you are paying taxes twice on that excess contribution.
Talk with one of our financial advisors about your retirement plan!
IRS Notice: https://www.irs.gov/pub/irs-drop/n-23-75.pdf