2024 Inflation Adjusted Retirement Account Limits Now Known
Every year about this time, the IRS announces new retirement plan benefit and contribution limits based on adjustments required by law for inflation. Because it is never too early to start planning and saving, these limits are important for you to know!
According to IRS Notice 2023-75, the amount that someone can contribute in 2024 to Section 401(k) plans increases to $23,000, up from $22,500 in 2023. The new amount also applies to Section 403(b) and most Section 457 plans, as well as the federal government's Thrift Savings Plan.
The limit on annual contributions to traditional and Roth individual retirement arrangements (IRAs) also increases by $500 to $7,000 per person, although the IRA catch-up contribution limit for those age 50 and older remains at $1,000.
The catch-up contribution limit for employees aged 50 and older who participate in 401(k), 403(b), and most 457 plans, and the federal government's Thrift Savings Plan, remains $7,500 for 2024. This means that participants in these plans who are 50 and older now can contribute up to $30,500 in 2024 in total.
The amount someone can contribute to their SIMPLE plan is increased to $16,000, a rise from $15,500. The catch-up contribution limit for employees aged 50 and older who participate in SIMPLE retirement accounts remains $3,500 for 2024.
The income ranges for determining eligibility to make deductible contributions to traditional IRAs, and to contribute to Roth IRAs all are increased for 2024, as well.
In order to deduct contributions to a traditional IRA, certain conditions must be met. 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. Conversely, if neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-out rules do not apply.
For traditional IRAs, the 2024 updated phase-out ranges are:
- For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $77,000 and $87,000, up from between $73,000 and $83,000.
- For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $123,000 and $143,000, adjusted from a range of $116,000 and $136,000.
- For a spouse making the IRA contribution who is not covered by a workplace retirement plan but is married to someone who is covered, the phase-out range is increased in 2024 to between $230,000 and $240,000, rising from between $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 is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
The income phase-out range for people making contributions to a Roth IRA is also increased. The new range is 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, as compared to the old range in 2023 of between $218,000 and $228,000.
As with a traditional IRA, 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.
A related retirement planning tax benefit is the saver’s credit, also known as the retirement savings contributions credit. The saver’s credit can be as high as 50% of eligible retirement plan contributions, such as to an IRA or 401(k), up to a maximum credit of $2,000 for married filing jointly couples and $1,000 for others, for taxpayers whose income falls below certain levels.
The income limit for the saver's 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.
