The IRS released its 2024 cost-of-living adjustments for retirement savers. Among the highlights are higher annual contribution limits to qualifying plans and higher income limits for individuals to make deductible contributions to traditional Individual Retirement Arrangements (IRAs) or make a taxable contribution to a Roth IRA.
Employer-Sponsored Retirement Plans
For 2024, the maximum contribution employees can make to a workplace 401(k), 403(b) or 457 plan is $23,000, increasing the limit by $500 from 2023. Catch-up contributions for plan participants who are age 50 and older remain unchanged at $7,500. Therefore, individuals 50 and older may make a maximum employee contribution of $30,500 to their employer-sponsored 401(k), 403(b) or 457 plans in 2024.
Employees generally have until Dec. 31, 2024, to make salary deferral contributions to their workplace retirement plans. However, business owners with Schedule C income have until April 15, 2025, to contribute to their plans as employees and to contribute an employer match.
As shown in the chart below, there are also changes 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 2024 to $16,000, up from $15,500 in 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 |
For plan sponsors, it also is important to note the following:
Individual Retirement Accounts
The maximum amount an individual may contribute to a traditional IRA in 2024 is $7,000, a $500 increase from 2023. Catch-up contributions for individuals who are age 50 and older remain at $1,000. These contributions may be deductible when a workplace retirement plan covers the individual or their spouse. The deduction may be reduced or phased out until it is eliminated based on the following:
The IRS has also increased the maximum income limits individuals must meet to qualify for taxable contributions to Roth IRAs in 2024.
| 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 an annual contribution to a traditional IRA or a Roth IRA is the federal tax filing deadline. Therefore, barring any postponements to the filing deadline, taxpayers have until April 15, 2025, to make their 2024 IRA contributions. 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.
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 after reaching age 59½, provided they own the Roth IRA for a minimum of five years. While this “back-door IRA” remains legal under current tax law, it is subject to change based on future legislation and modifications to the tax code.
About the Author: Danielle Keyes is a retirement plan consultant with Provenance Wealth Advisor (PWA), an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs and a registered representative with PWA Securities, LLC. She can be reached at the firm’s Fort Lauderdale, Fla., office at (954) 712-8888 or info@provwealth.com.
Provenance Wealth Advisors (PWA), 200 E. Las Olas Blvd., 19th Floor, Ft. Lauderdale, FL 33301 (954) 712-8888.
Danielle Keyes is a registered representative of and offers securities through PWA Securities, LLC, Member FINRA/SIPC.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
Any opinions are those of the advisors of PWA and not necessarily those of PWA Securities, LLC. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of PWAS, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Prior to making any investment decision, please consult with your financial advisor about your individual situation.
Every investor’s situation is unique. You should consider your investment goals, risk tolerance and time horizon before making any investment or withdrawal decision. Investing involves risk and you may incur a profit or loss regardless of the strategy selected.
401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59½, may be subject to a 10 percent federal tax penalty. Investing involves risk, investors may incur a profit or loss regardless of the strategy or strategies employed. Future investment performance cannot be guaranteed. Matching contributions from an employer may be subject to a vesting schedule. Please review your retirement plan documents or consult with a financial professional for more information.
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Posted on December 27, 2023