Retirement savings limits are increasing.
The IRS says that the amount you can sock away for retirement is going up. In 2024, individuals can contribute up to $23,000 to their 401(k) plans in 2024—up from $22,500 for 2023. And those playing catch-up get a boost, too: the catch-up contribution limit for employees aged 50 and over is an additional $7,500 for 2024.
The announcement was tied to cost‑of‑living adjustments for pension plans and other retirement-related items for tax year 2024. Here’s a look at some of the most common:
401(k) Plans
The $23,000 limit applies to employee contributions made to 401(k) plans, or similar plans maintained by non-profit and government employers—403(b) plans, most 457 plans and the federal government’s Thrift Savings Plan for workers. If you’re over 50, you can use a catch-up contribution in 401(k), 403(b), and most 457 plans, as well as the federal government’s Thrift Savings Plan, to contribute up to $30,500 in 2024.
Typically, these are pre-tax contributions made to retirement plans by workers. You’re likely already familiar with how it works at the onset—you tick a box on a benefits form that allows you to set aside part of your earnings for retirement.
From a tax standpoint, the benefit is two-fold: earnings don’t count towards your current year income (which reduces your potential tax bill) and it grows tax-deferred. When you reach retirement age, withdrawals are taxable as you take the money out (with certain exceptions for money transferred directly to charity).
IRA Plans
The limit on annual contributions to an IRA increased to $7,000 in 2024, up from $6,500 in 2023—that limit applies to the total amount contributed to your traditional and Roth IRAs.
IRA plans also allow catch‑up contributions for individuals aged 50 and over—that remains $1,000 for 2024, for a total of $8,000 for workers age 50 and above.
With a traditional IRA, contributions are tax-advantaged. If you meet the criteria—that’s where these limits come into play—contributions will be tax-deductible, resulting in a lower tax bill. As with a 401(k) plan, the earnings inside an IRA grow tax-deferred and are subject to tax when you make withdrawals.
In addition to the contributions limits, phase-outs apply. What this means is that if during the year, you or your spouse was covered by a retirement plan at work, your tax deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. Here are the phase‑out ranges for 2024:
- For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $77,000 and $87,000 in 2024, up from between $73,000 and $83,000 in 2023.
- 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 in 2024, up from between $116,000 and $136,000 in 2023.
- 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 in 2024, up from between $218,000 and $228,000 in 2024.
- For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range remains between $0 and $10,000 (those numbers do not change because they not subject to an annual cost-of-living adjustment).
Importantly, if neither you nor your spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.
Roth IRA Plans
When it comes to tax, Roth IRAs are treated much differently than traditional IRAs. Unlike a traditional IRA, contributions to a Roth IRA are not deductible when made. The upside? Qualified withdrawals are typically tax-free, assuming that you meet the criteria, including that you’ve owned your account for five years and you have reached age 59½ or more (some exceptions apply).
As noted above, the limit on annual contributions to an IRA increased to $7,000 in 2024, up from $6,500 in 2023—that limit applies to the total amount contributed to your traditional and Roth IRAs.
Income phase-outs apply to Roth IRAs, too. For 2024, those numbers have increased to between $146,000 and $161,000 for singles and heads of household, up from between $138,000 and $153,000 in 2023. For married couples filing jointly, the income phase-out range is increased to between $230,000 and $240,000 in 2024, up from between $218,000 and $228,000 in 2023. And, as with traditional IRAs, the phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA remains between $0 and $10,000.
SIMPLE Retirement Accounts
A SIMPLE IRA plan—SIMPLE stands for Savings Incentive Match Plan for Employees (not so simple, right?)—makes it easy for small businesses who are not currently sponsoring a retirement plan to contribute to IRAs.
The amount that individuals can contribute to their SIMPLE retirement accounts is increased to $16,000 in 2024, up from $15,500 in 2023. The catch-up contribution limit for employees 50 and over who participate in SIMPLE IRA plans remains an additional $3,500 for 2024, bring the total potential contributions for those over 50 to $19,500.
Savers Credit
Some taxpayers are able to claim a tax credit for making eligible contributions to an IRA or employer-sponsored retirement plan. The Saver’s Credit, also known as the Retirement Savings Contributions Credit, is targeted to low- and moderate-income workers.
In 2024, income limits are $76,500 for married couples filing jointly in 2024, up from $73,000 in 2023. The limit increases to $57,375 for heads of household in 2024, up from $54,750 in 2023. And, for singles and married couples filing separately, the amount increases to $38,250 in 2024, up from $36,500 in 2023.
Defined Benefit Plans
Defined benefit plans aren’t as popular as they used to be—they’re typically associated with old-school pensions. However, they’re still around for some businesses who appreciate the deductions on the employer side available for contributions.
In 2024, the limit on the annual benefit under a defined benefit plan will increase to $275,000, up from $265,000 in 2023.
QLACs
A qualified longevity annuity contract (QLAC) allows you to convert funds in a qualified retirement plan—like your 401(k) or IRA—into an annuity. The dollar limit on premiums paid for a QLAC was increased to $200,000 pursuant as part of the SECURE 2.0 Act of 2022 for contracts purchased or received in an exchange on or after Dec. 29, 2022.
Qualified Charitable Distributions
A qualified charitable distribution (QCD) allows you to roll funds directly from your IRA to a qualified charity. Those amounts can be used to satisfy your required minimum distributions (RMDs) for the year and the amount donated is excluded from your taxable income—you won’t even have to itemize to do it.
The total amount of QCDs that you can exclude from your gross income increased to $105,000 in 2024, up from $100,000 in 2023.
In addition, as part of SECURE 2.0, you can make a one-time election for a QCD to a split-interest entity. That amount was initially $50,000, but is adjusted for inflation and will be $53,000 in 2024.
More Info
More details about retirement plans cost-0f-living adjustments can be found in the official guidance, Notice 2023-75.
The official income tax brackets for 2024 aren’t available yet, but you can see projections for next year here.
