As it does every year, the Internal Revenue Service announced the new contribution limits for retirement accounts such as 401(k) plans.
Many Americans will be happy to know that the limits for most accounts will be higher in 2024 than they were this year.
Citing the continuing increase in living costs, the IRS said it would be boosting the annual contribution limits for individuals to 401(k), 403(b), many 457 plans and the Thrift Savings Plan to $23,000. That’s a $500 increase from 2023.
Anyone who is at least 50 years old also has the ability to contribute an additional $7,500 to any of those plans next year because of the catch-up program. The limit for that, then, is $30,500 in 2024.
These retirement plans were created so that employees would be incentivized to save for retirement, giving them tax-deferred money into retirement accounts. In addition, it helps to lower their annual taxable income.
In addition to those plans, people who contribute to IRAs will also enjoy an increase in limit for 2024. The limit for next year will be $7,000, also a $500 increase from 2023. The catch-up contribution will be set at $8,000 for anyone who is at least 50 years old.
By increasing the contribution limits, the IRS is trying to help more people save for retirement, especially those who use the “catch up” program to try to make up for savings they didn’t make earlier in their lives.
Phase-out income thresholds will also be increasing for those who have IRAs.
Single taxpayers who are covered by a retirement plan at their workplace will see this range increase to a range of $77,000 through $87,000 – up from $73,000 through $83,000.
Married couples who file jointly and who are covered by a retirement plan at work will see their range increase to a range of $123,000 through $143,000 – up from a range of $116,000 through $136,000.
Any contributor to an IRA who doesn’t have a retirement plan at their workplace but is married to someone who is will see their range increase to $230,000 through $240,000 – up from a range of $218,000 through $228,000.
Married individuals who file separate tax returns but are covered by a retirement plan at work don’t benefit from a cost-of-living adjustment to their phase-out range. That means it’ll remain at a range of $0 to $10,000 for 2024.
Those who are employees of small businesses or who are self-employed will see an increase in specific retirement plans that are set up for them. The Savings Incentive Match Plan for Employees, also known as the SIMPLE plan, will see contribution limits increase to $16,000 in 2024, up from $15,500 in 2023.
The IRS publishes a full rundown of every change it has made for 2024 on its website for anyone to view.