Effective January 1, 2024
On the first of November, 2023, the Internal Revenue Service (IRS) unveiled adjustments to retirement savings contribution limits for the year 2024, reflecting changes in the cost of living. Key updates include:
Employees enrolled in 401(k), 403(b), and most 457 plans will see their contribution limits elevated to $23,000, a $500 rise from the prior limit of $22,500.
Individuals saving through an individual retirement account (IRA) will now be able to set aside $7,000, which is an increase from the previous $6,500 limit. However, the additional catch-up contribution limit for savers aged 50 and above remains unchanged at $1,000.
For those aged 50 and above contributing to 401(k), 403(b), most 457, and Savings Incentive Match Plan for Employees (SIMPLE) plans, the catch-up limit stands firm at $7,500. This means participants in the aforementioned plans who are 50 or older have a maximum contribution ceiling of $30,500 for 2024. SIMPLE plan participants aged 50 and above have a catch-up limit maintained at $3,500.
Modified income ranges for 2024 will affect the ability to make deductible contributions to traditional IRAs, Roth IRA contributions, and eligibility for the Saver’s Credit, also known as the Retirement Savings Contributions Credit. Deductibility of traditional IRA contributions is dependent on if the taxpayer or their spouse is covered by a retirement plan at their workplace; such deductibility phases out at higher income levels.
Here are the new phase-out ranges for 2024:
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- Single taxpayers with a workplace retirement plan will see their phase-out range shift to $77,000 to $87,000, a leap from the $73,000 to $83,000 range of 2023.
- Married couples filing jointly where the IRA contributor is covered by a workplace plan will have a phase-out range from $123,000 to $143,000, which is up from $116,000 to $136,000.
- For those not covered by a workplace retirement plan but married to someone who is, the phase-out range is now set at $230,000 to $240,000, rising from $218,000 to $228,000.
- Married individuals filing separately and covered by a workplace retirement plan will continue to have a phase-out range of $0 to $10,000, unchanged by cost-of-living adjustments.
- Roth IRA contribution eligibility will also see phase-out ranges adjusted. Single taxpayers and heads of household can now earn between $146,000 and $161,000, up from $138,000 to $153,000.
- Married couples filing jointly have their range bumped up to $230,000 to $240,000 from the previous $218,000 to $228,000.
- The phase-out for married individuals filing separately remains static at $0 to $10,000.
- The Saver’s Credit income threshold increases to $76,000 for married couples filing jointly, $57,375 for heads of household, and $38,250 for singles and married individuals filing separately.
- Contribution limits for SIMPLE retirement accounts have also climbed, reaching $16,000 from the former $15,500 cap.
The IRS Notice 2023-75 includes further details on these adjustments along with other retirement-related cost-of-living changes for the year 2024.
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