It’s officially a $500 increase for the 2024 401(k) IRS contribution limit.
As predicted in forecasts earlier this year, the Internal Revenue Service announced today that the amount individuals can contribute to their 401(k) plans in 2024 has increased to $23,000, up from $22,500 for 2023.
The IRS today also issued technical guidance regarding all of the cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2024 in Notice 2023-75.
2024 changes
The contribution limit for employees who participate in 401(k), 403(b), and most 457 plans, as well as the federal government’s Thrift Savings Plan is increased to $23,000, up from $22,500.
The limit on annual contributions to an IRA will increase to $7,000, up from $6,500. The IRA catch-up contribution limit for individuals aged 50 and over was amended under the SECURE 2.0 Act of 2022 to include an annual cost of living adjustment but remains $1,000 for 2024.
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), and most 457 plans, as well as the federal government’s Thrift Savings Plan remains $7,500 for 2024. Therefore, participants in 401(k), 403(b), and most 457 plans, as well as the federal government’s Thrift Savings Plan who are 50 and older can contribute up to $30,500, starting in 2024. The catch-up contribution limit for employees 50 and over who participate in SIMPLE plans remains $3,500 for 2024.
The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the Saver’s Credit all increased for 2024.
Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. 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. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) 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, 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.
The income phase-out range for taxpayers making contributions to a Roth IRA is increased to 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, up from between $218,000 and $228,000. 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.
The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions 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.
The amount individuals can contribute to their SIMPLE retirement accounts is increased to $16,000, up from $15,500.
SECURE 2.0 changes
Additional changes made under SECURE 2.0 are as follows:
• The limitation on premiums paid with respect to a qualifying longevity annuity contract (QLAC) to $200,000. For 2024, this limitation remains $200,000.
• Added an adjustment to the deductible limit on charitable distributions. For 2024, this limitation is increased to $105,000, up from $100,000.
• Added a deductible limit for a one-time election to treat a distribution from an individual retirement account made directly by the trustee to a split-interest entity. For 2024, this limitation is increased to $53,000, up from $50,000.
Details on these and other retirement-related cost-of-living adjustments for 2024 are in Notice 2023-75, available on IRS.gov.
Modest increase follows historic 2023 boost
This year, defined contribution plans got a historic $2,000 contribution limit boost—the largest increase ever in terms of dollars and percentage, just under an unprecedented 10%.
The catch-up provision for participants aged 50 or over also increased for 2023 from $6,500 to $7,500, totaling $30,000 in employee contributions alone.
Annual IRA contributions increased to $6,500 from $6,000, and the catch-up provision remained unchanged at $1,000.
HSA contribution limits get huge 2024 boost
Back in Mid-May, the Internal Revenue Service announced that the annual contribution limit in 2024 for Health Savings Accounts will jump to $4,150 for self-only coverage (up from $3,850 in 2023) and $8,300 for family coverage (up from $7,750 in 2023). The inflation-adjusted amounts mark the largest-ever increase to the amount of money that can contributed to the triple-tax advantaged accounts each year.
The increases are detailed in IRS Revenue Procedure 2023-23 and go into effect in January 2024. HSA account holders age 55 and older can contribute an extra $1,000, which means an older married couple could sock away $10,300 a year, up from $9,750 this year.
To be eligible to contribute, a participant must have an HSA-qualified high-deductible health plan (HDHP) and not be enrolled in Medicare.
SEE ALSO:
• $500 Boost Projected for 2024 401(k) Contribution Limit
• HSA Contribution Limits Get Biggest-Ever Boost for 2024
• 2023 Changes to 401k, HSA Contribution Limits and a Historic Social Security COLA
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
Thank you for this useful information, Brian!