(NEXSTAR) – The Internal Revenue Service delivered good news for retirement savers Wednesday, announcing that the limit on contributions to 401(k) and other popular accounts will be higher in 2024.
The IRS, citing the rising cost of living, boosted the annual individual contribution limits for 401(K), 403(b), most 457 plans and the government’s Thrift Savings Plan by $500, to $23,000.
People who are 50 or older can contribute another $7,500 to those plans in 2024 as part of the catch-up contribution program, which will have a limit of $30,500.
These plans are typically created for employees to stash tax-deferred dollars in retirement accounts, also lowering their overall taxable income in the process.
IRA contributors will be able to invest up to $7,000 in 2024, up from $6,500, with the catch-up contribution limit for those 50 or older set at $8,000.
Raising contribution limits allows savers to put aside more money to meet retirement goals, something that is especially helpful for those who are trying to “catch up” later in their careers.
Along with contribution amounts, the IRS is also raising phase-out income thresholds for IRA holders:
- 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, up from between $116,000 and $136,000.
- For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range 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 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.
Unlike the tax-deferred plans, while Roth IRA contributors must pay taxes on the money that goes in, they are able to withdraw money tax-free after years of growth, in most cases.
The cap for 2024 Roth contributions jumps $500 from $6,500 to $7000, as stated before.
Roth IRA phaseouts based on income will also be more inclusive next year.
The range for taxpayers making contributions to a Roth IRA goes up to between $146,000 and $161,000 for singles and heads of household, an $8,000 increase. For married couples filing jointly, the income phase-out range is increased to between $230,000 and $240,000, a $12,000 jump. 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.
SIMPLE IRA and the Saver’s Credit
The SIMPLE, or Savings Incentive Match Plan for Employees, allows small-business employees and those who are self-employed to put money away for retirement.
In 2024, SIMPLE contributors will be able to invest $16,000, up from $15,500.
For low- and moderate-income workers who qualify for the Saver’s Credit, also known as the Retirement Savings Contributions Credit, there will be new income thresholds next year: $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.
The IRS has published a detailed rundown of the changes for 2024 on its website.