IRS Raises Retirement Limits

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The IRS has announced new contribution limits for defined contribution plans and individual retirement accounts (IRAs) for the 2024 tax year, reflecting cost-of-living adjustments.

Increased Contribution Limits for 2024

Starting in 2024, workers participating in 401(k), 403(b), most 457 plans, and the federal Thrift Savings Plan can contribute up to $23,000, a $500 increase from 2023. Similarly, the annual IRA contribution limit will increase from $6,500 to $7,000.

Catch-Up Contributions Remain Unchanged

Catch-up contributions for those aged 50 and older will remain at $7,500 for defined contribution plans. This allows eligible individuals to contribute up to $30,500 in total for 2024. For IRAs, the catch-up contribution remains at $1,000, enabling older savers to contribute up to $8,000.

SECURE 2.0 Act Super Catch-Up Coming in 2025

The super catch-up provision from the SECURE 2.0 Act, which will allow those aged 60 to 63 to contribute an additional $10,000 or half of the ordinary catch-up amount, is set to take effect in 2025, with inflation adjustments starting in 2026.

Income Eligibility Adjustments

The income eligibility ranges for IRAs and Roth IRAs have increased for 2024. For traditional IRAs, the phase-out range for single taxpayers in workplace plans will rise to $77,000-$87,000. For Roth IRAs, the range for singles and heads of households will increase to $146,000-$161,000. The income limit for the Saver’s Credit has also increased, with married couples filing jointly now eligible up to $76,500.

These adjustments aim to help individuals save more effectively for retirement while accounting for inflation.

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