Originally published: November 3, 2023 (distributed by Andrews McMeel Syndication).
It’s time to review annual changes for retirement plan contribution limits.
On Nov. 1, the IRS released the new contribution limits for 2024 for 401(k)s and IRAs through Notice 2023-75 (tinyurl.com/4e697hue). The increase in limits is based on annual cost-of-living adjustments required under Section 415(d) of the Internal Revenue Code (tinyurl.com/y5ud48fk).
For 401(k)s, 403(b)s, most 457 plans and the federal government’s Thrift Savings Plan (defined contribution plans), the new limit is $23,000, up from $22,500 in 2023. The $500 increase is smaller than last year’s $2,000 jump from $20,500 to $22,500.
The catch-up contribution limit for employees 50 and older remains at $7,500 for 2024. For those employees, their total contribution can be as much as $30,500 in 2024.
The combined limit of employee and employer contributions increases by $3,000 in 2024 to $69,000 from $66,000 (the increase in 2023 was $5,000 more than in 2022). If you are eligible for catch-up contributions, the maximum combined limit is $76,500 in 2024.
Let’s turn to IRAs. The limit on annual contributions has increased to $7,000 in 2024 from $6,500 in 2023, the second consecutive year it has risen by $500 (tinyurl.com/znpvc7mb). Keep in mind that $7,000 is the total amount you can contribute to all of your traditional IRA and Roth IRA accounts in 2024.
If you are 50 or older, you can add $1,000 as a catch-up contribution in 2024 for a total maximum contribution of $8,000. This $1,000 has not increased from the 2023 limit despite the fact that the SECURE 2.0 Act of 2022 amended the rule for IRA catch-up contributions to include an annual cost-of-living adjustment.
Deductible contributions to traditional IRAs are based on modified adjusted gross income, or MAGI:
-- For a single taxpayer or head of household covered by a workplace retirement plan, the phase-out range is increased to between $77,000 and $87,000 (up from $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 between $123,000 and $143,000 (up from $116,000 and $136,000 in 2023).
-- For a person who is contributing to an IRA and is not covered by a workplace retirement plan but is married to someone who is covered, the phase-out range is between $230,000 and $240,000 (up from $218,000 and $228,000 in 2023).
For contributions to Roth IRAs, the income phase-out ranges are:
-- Between $146,000 and $161,000 for singles and heads of households (up from $138,000 and $153,000 in 2023).
-- Between $230,000 and $240,000 for married couples filing jointly (up from $218,000 and $228,000 in 2023).
More people will be able to take advantage of the Saver’s Credit (also known as the Retirement Savings Contributions Credit), which is a retirement savings tax credit available for taxpayers in lower- or middle-income groups.
The income limit will be $76,500 in 2024 for married couples filing jointly (up from $73,000 in 2023); $57,375 for heads of household (up from $54,750); and $38,250 for singles and married individuals filing separately (up from $36,500).
You can see more details about the Saver’s Credit at tinyurl.com/368fvwp8.
If you are charitably inclined and over age 70 1/2, you’ll be able to contribute more to charity using the QCD (qualified charitable distribution). The limit in 2024 will be $105,000, up from $100,000 in 2023. The increase is due to “changes made under SECURE 2.0,” according to Notice 2023-75.
And, a reminder: Some people who are eligible but not participating in their 401(k)s desperately need someone to encourage them to study their plans. If you’ve done your homework and can mentor others, tell me your story by applying for the 2023 401(k) Champion Award. This is a pro bono initiative I sponsor to help employees help each other to save for retirement. Three 401(k) Champions receive $1,000 each. Apply at 401kchampion.com.