The New Contribution Limits for Retirement Accounts Are Out
By Dan Nastou, CFA
If you’re already contributing to a retirement account, then feel free to jump ahead to the numbers. If you aren’t, here’s a quick intro before we get started.
A dedicated retirement account, like a 401(k) or IRA, can be a great place to hold your long-term investments. That’s because these accounts offer a tax benefit and some employers even offer a matching program for workplace plans, which is essentially free money. Also, when you make contributions directly from your paycheck, that can help force you to regularly put money away for long-term goals, money that you might otherwise be tempted to spend.
However, there are a few important rules for how these plans work, including how much money you can contribute each year. The IRS just updated those contribution limits for 2024, so let’s go over them and a few more details about these accounts. Let’s get to it!
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IRA contribution limits
– Roth IRA
– Traditional IRA
401(k) and 403(b) contribution limits
IRA Contributions
For an Individual Retirement Account, or IRA, the annual contribution limit has increased from $6,500 in 2023 to $7,000 for 2024. And if you’re 50 or older, the limit increased from $7,500 to $8,000 (the $1,000 “catch-up” remains unchanged).
Keep in mind, this is the total annual IRA limit across all of your accounts. So if you have more than one IRA, say a traditional IRA and a Roth IRA, the maximum combined amount you can contribute for 2024 is $7,000.
There are some other restrictions on IRA accounts you should know about too;
…For Roth IRAs
With a Roth IRA, your contribution limit may be impacted by your income, measured by your modified gross adjusted income.
• 2023 – For single tax filers, if your earn less than $138,000, you can contribute the full amount. If you earn between $138,000 and $153,000, your contribution maximum will be reduced. And if you earn more than $153,000, you can not contribute to a Roth IRA.
• 2024 – For single tax filers, if your earn less than $146,000, you can contribute the full amount. If you earn between $146,000 and $161,000, your contribution maximum will be reduced. And if you earn more than $161,000, you can not contribute to a Roth IRA.
You can get the details for other filers on the IRS website.
…For Traditional IRAs
With a Traditional IRA, you can always contribute up to the full limit amount. But if you or your spouse is covered by an employer-sponsored retirement plan (like a 401(k) or 403(b)), then depending on your income, you may not be able to deduct the full amount of your contribution.
We’ve broken out the 2024 phase out ranges by tax filing status. Remember, if you earn less than the range you can deduct the full amount. If you earn within the range your deduction will be lower. And if you earn more you can not deduct any of it.
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 in 2023.
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 in 2023.
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 in 2023.
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.
And if you want to learn more about IRA accounts in general, we have you covered here.
Workplace Retirement Plans – 401(k) and 403(b)
IRA’s aren’t the only option in town. Instead, you may have a workplace retirement plan, like a 401(k), or 403(b) if you work for a non-profit.
The annual contribution limit for 401(k) plans and 403(b) plans has increased to $23,000 for 2024 from $22,500 in 2023.
Additionally, anyone 50 years or older can contribute an additional “catch-up” amount on top of the standard limit. This will remain at $7,500 for 2024. So if you’re 50 or older, you can contribute up to $30,500 for 2024 (up from $30,000 in 2023).
Please note, this is just the maximum amount you can contribute set by the IRS. If your employer offers a match, that may max out at a lower number. Make sure you know what your employer offers and take advantage to the extent it makes sense for you.
If you’re interested, we have more info on 401(k)s and 403(b)s. We cover other personal finance topics too.
And of course you can check out the IRS website for additional resources. There’s a lot of info there, so spend some time digging around.
This content is intended for educational purposes and should not be taken as specific investment advice. Please talk to your financial professional if you need help or are thinking about making changes to your investments.
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