What are the new 401(k) and IRA contribution limits for 2024?

By: AJ Ayers, CFP®

Summary: The IRS announced higher contribution limits for 2024 for IRAs and 401(k)s.

Christmas came early this year for us Certified Financial Planners!

That’s right; the IRS just announced the new contribution limits for IRAs and 401(k)s and things are looking UP!

This update affords opportunities for those looking to boost their retirement savings while enjoying valuable tax benefits.

Key Highlights:

  1. 401(k) Plans: The annual contribution limit for 401(k) plans will rise to $23,000 in 2024, up from the previous limit of $22,500. This means that you can contribute an extra $500 pre-tax dollars towards your retirement nest egg.

  2. Traditional and Roth IRAs: For those utilizing Individual Retirement Accounts (IRAs), the contribution limit will increase to $7,000 in 2024, up from $6,500. This allows you to save an additional $500 in a tax-advantaged IRA.

  3. Catch-Up Contributions: If you're aged 50 or older, there's more good news. The catch-up contribution limit for 401(k) plans and IRAs will also increase. For 401(k)s, you can contribute and extra $7,500, bringing the total to $30,500. The Catch-up for IRAs remains the same at an extra $1,000.

  4. More Roths for the people. If you make too much money, you won’t be able to contribute directly to a Roth IRA, but the adjusted gross income phaseout range is going up. It’s $146,000 and $161,000 for single individuals and heads of households, up from between $138,000 and $153,000 in 2023. And for married folks filing jointly, the phaseout range is $230,000 and $240,000 in 2024, up from between $218,000 and $228,000 in 2023.

Tax Benefits: These increases provide you with the opportunity to save more for retirement while reducing your taxable income. Maximize these tax benefits by taking full advantage of the new contribution limits. While many BKFi clients make too much money to contribute to a Roth IRA , our ace team helps them legally go in “through the back door.”

In conclusion, the IRS's announcement of higher retirement contribution limits for 2024 is excellent news for anyone planning for a secure retirement. With these increases, you have the chance to save more and enjoy valuable tax advantages. That extra $500 in your 401(k) will compound over decades and can buy you a few more Mojitos in retirement.

AJ Grossan