Every year, the Internal Revenue Service (IRS), determines contribution limits for qualified retirement plans. These adjustments take a variety of factors into consideration, including inflation, cost of living, and more.
The IRS has announced its 2024 retirement plan changes and that the contribution limits for 401(k) plans and other retirement accounts will be higher than previous years.
As 2024 begins, it’s important to understand the contribution changes so you can review and adjust your budget to ensure you’re maximizing retirement saving efforts. A small change can go a long way, so whether you’re new in your career, or utilizing catch-up contributions for your approaching retirement, see how you can make the most of your money.
401(k) Plans
401(k) plans, including 403(B) and most 457 plans, have increased by $500, totaling $23,000 for individual accounts.
If you’re over the age of 50 and utilizing catch-up contributions, you can contribute an additional $7,500, totaling $30,500 annually.
These employer-sponsored retirement plans offer employees an opportunity to contribute tax-deferred dollars into their retirement accounts, which decreases taxable income in the process. If you’re not sure what your current contributions are, or how to make adjustments for the 2024 limits, contact your company’s human resources team or benefits specialist.
Individual Retirement Accounts (IRA)
In addition to an employer-sponsored retirement plan, you may also own and manage an individual retirement account – or IRA. These accounts are designed to help individuals set aside additional funds for retirement, while selecting an investment strategy as well.
In 2024, the limit has increased an additional $500, totaling $7,000, and participants using catch-up contributions can contribute a total of $8,000. These changes are paired with phase-out income thresholds, which are also changing in 2024. The Hill breaks down important changes to phase-out limits below.
- Single taxpayers with an employer-sponsored retirement plan will now have a phase-out range between $77,000 and $87,000, which increased $5,000 from 2023.
- Married couples filing jointly, who have a spouse enrolled in an employer-sponsored plan while also making IRA contributions, will have a phase-out range between $123,000 and $143,000, up from $116,000 and $136,000.
- Participants with an IRA plan, who is not covered by an employer-sponsored retirement plan, but is married to someone who is, the phase-out range increased to $230,000 and $240,000.
- Married couples filing separately, who are also covered by employer retirement plans, will not have a phase-out range subjected to annual cost-of-living, but will remain unchanged between $0 and $10,000.
Specialty Plans – SIMPLE IRA and Saver’s Credit
SIMPLE IRA plans are made available for those who are self-employed or employed by a small business. This simplified plan allows small business employers the opportunities to contribute to their employee retirement plans through salary reduction contributions or nonelective contributions. In 2024, plan participants will be able to save up to $16,000, which is $500 more than 2023.
Another specialty retirement plan is Saver’s Credit, also known as the Retirement Savings Contributions Credit. This plan provides tax breaks for low- and moderate-income workers to offset the cost of saving for retirement.
Turbo Tax notes that eligible participants can claim credit for 50%, 20% or 10% of the first $2,000 in contributions made to a retirement account on an annual basis. Contributions can be claimed for a variety of accounts, including 401(k), 403(b), 457 plan, SIMPLE IRA, and more.
In 2024, the new limits for Saver’s Credit are as follows:
- Married Couples Filing Jointly: $75,500, up from $73,000 in 2023.
- Head of Household: $57,375, up from $54,750 in 2023.
- Single or Married and Filing Separately: $38,250, up from $36,500 in 2023.
To learn about eligibility requirements for the Saver’s Credit, visit the IRS.
SECURE Act 2.0
In 2022, the SECURE Act 2.0 was signed into law with the purpose of improving retirement savings opportunities. While the Act initially contained provisions to promote savings, boost incentives for business, and offer better flexibility for retirement plan participants, there are changes to expect in 2024, noted from the IRS below.
- Adjusted the deductible limit on charitable contributions from $100,000 to $105,000.
- Kept the limitation on premiums paid with respect to a qualifying longevity annuity contract at $200,000.
To view a full list of changes, visit the IRS Newsroom.
While the changes participants will see in 2024 are generally positive, it’s important to maximize your contributions as best you can and plan ahead. To determine if you need to make room in your budget to save additional funds for retirement, use the Slavic401k calculator library. There, you will find retirement planner calculators, contributions calculators, and more.
For advice on goal-based wealth management, speak with a Slavic401k financial advisor. Together, they can help you set goals for all of life’s biggest moments, including starting a family, homeownership, opening a business, retirement, and more. Click here to learn more.
