IRS Sets Retirement Savings Plan Contribution Limits for 2024 by Jonathan Kraes, CPA
Posted on December 27, 2023
by
Jonathan Kraes
The IRS’s 2024 cost-of-living adjustments for retirement savers include higher annual contribution limits to 401(k) plans and Individual Retirement Accounts (IRAs) along with higher income limits for individuals to qualify for tax-deductible contributions to traditional IRAs and taxable contribution to Roth IRAs.
Employer-Sponsored Retirement Plans
In 2024, employees may contribute up to $23,000 into workplace 401(k), 403(b) and certain 457 plans, a $500 increase from the prior year. Catch-up contributions for plan participants age 50 and older remain unchanged at $7,500. Therefore, individuals 50 and older may make maximum employee contributions of $30,500 to their employer’s 401(k), 403(b) or 457 plan in 2024.
Generally, employees have until the last day of the calendar year to make salary deferral contributions to their workplace retirement plans. Business owners with Schedule C income have until April 15, 2025, to make their employee contributions and employer matches to these plans. For self-employed taxpayers with solo 401(k)s, the maximum amount they may contribute to those plans in 2024 is $69,000, up from $66,000 in the prior year. This limit includes taxpayers’ elective salary deferrals and the profit-sharing contributions made by their businesses. Contributions to SIMPLE retirement accounts (also known as SIMPLE IRAs) also increase in 2025 to $16,000, up $500 from 2023.
| |
2024 Limit |
2023 Limit |
| 401(k), 403(b) or 457 Employee Contribution Limit |
$23,000 |
$22,500 |
| Catch-Up 401(k), 403(b) or 457 Contribution |
$7,500 |
$7,500 |
| SIMPLE 401(k) and Simple IRA Contribution Limit |
$16,000 |
$15,500 |
| Catch-Up SIMPLE IRA and Simple IRA Contribution Limit |
$3,500 |
$3,500 |
Additional changes to note in 2024 include a $345,000 cap on annual compensation that can be considered for plan contributions (previously capped at $330,000) and a $155,000 limit on the definition of “highly compensated employee” (previously capped at $150,000). This threshold is important for determining how much highly compensated employees may contribute to their employers’ 401(k) plans.
Individual Retirement Accounts
The maximum amount individuals may contribute to their traditional IRAs and Roth IRAs in 2024 is $7,000, up from $6,500 in 2023. Catch-up contributions for individuals age 50 and older remain at $1,000.
Contributions to traditional IRAs may be deductible when a workplace retirement plan covers the taxpayer or their spouse. However, the deduction may be reduced or phased out entirely based on the taxpayer’s income and filing status.
- For single taxpayers covered by a workplace retirement plan, the income phase-out range increases in 2024 to between $77,000 and $87,000, up from between $73,000 and $83,000.
- For married couples filing joint tax returns, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range increases to between $123,000 and $143,000, up from $116,000 and $136,000.
- For IRA contributors who are not covered by workplace retirement plans and are married to someone covered, the income phase-out range increases to between $230,000 and $240,000, up from between $218,000 and $228,000.
- For married individuals filing separate returns 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.
The IRS also increases the maximum income limits individuals must meet to be eligible to contribute to a Roth IRA in 2024, based on their income and filing status.
- Singles and heads of household who earn up to $161,000 in 2024 may contribute to a Roth IRA, although the maximum contribution will begin to phase out when income reaches $146,000.
- For married couples filing joint tax returns, the phase-out range increases to between $230,000 and $240,000.
If a taxpayer earns too much income to contribute to a Roth IRA in 2023, they may instead contribute to a traditional IRA and later convert that account to a Roth for the benefit of tax-free distributions in retirement (provided they own the Roth IRA for a minimum of five years).
| |
2024 Limit |
2023 Limit |
| Maximum Traditional IRA and Roth IRA Contribution |
$7,000 |
$6,500 |
| Catch-Up IRA Contribution |
$1,000 |
$1,000 |
The deadline for making annual contributions to traditional IRAs or Roth IRAs is April 15 of the year following their contribution. This additional time allows individuals to assess their tax liabilities at the end of the year and determine whether it is more beneficial to claim the deduction for that year by contributing to a traditional IRA or paying taxes now on contributions to a Roth IRA, for which future withdrawals in retirement will be tax-free.
About the Author: Jonathan Kraes, CPA, is a director of Tax Services with Berkowitz Pollack Brant, where he provides income, gift and estate tax planning and advisory services to high-net-worth individuals and organizations, including hedge and private equity fund investment managers, corporate executives and technology entrepreneurs. He can be reached at the CPA firm’s Boca Raton, Fla., office at (561) 361-2000 or info@bpbcpa.com.
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