IRS Increases 401(k) Limit to $23,000 for 2024, IRA Limit to $7,000

The Internal Revenue Service on Wednesday announced the annual contribution limits for qualified defined contribution plans and individual retirement accounts for the 2024 tax year.

The annual contribution limit for workers who participate in 401(k), 403(b) and most 457 plans, as well as the federal government’s Thrift Savings Plan, will be increased to $23,000 from $22,500 in 2023. The annual IRA contribution will increase to $7,000 from $6,500.

DC plan contribution limits grow in step with the inflation rate for the third quarter of this year, 3.2%, rounded down to the nearest $500 increment.

Catch-up contributions for those 50 years and older in DC plans will remain at $7,500, adding up to a total allowed annual contribution of $30,500 for qualifying DC plans.

The super catch-up contribution provision in the SECURE 2.0 Act of 2022 will not take effect until 2025. When it does, it will permit those aged from 60 through 63 to contribute the greater of $10,000 or half the ordinary catch-up amount (currently $7,500), both of which will be indexed to inflation starting in 2026.

The $1,000 catch-up contribution for IRAs remains unchanged, allowing those aged 50 years and older to contribute up to $8,000 annually. The IRA catch-up was pegged to inflation by the SECURE 2.0 Act of 2022 but was not increased for 2024.

The income eligibility ranges for IRAs and the Saver’s Credit likewise increased for 2024.

Traditional IRAs

For single taxpayers in a workplace plan, the phase-out range for traditional IRAs will increase to between $77,000 and $87,000 from between $73,000 and $83,000. For married couples, the amount will increase to between $123,000 and $143,000, up from between $116,000 and $136,000.

For a traditional IRA contributor not covered by a workplace retirement plan and married to someone who is covered, the phase-out range will increase to between $230,000 and $240,000, up from between $218,000 and $228,000.

For a married individual who is covered by a workplace retirement plan and is filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and will remain between $0 and $10,000.

Roth IRAs

The income phase-out range for taxpayers making contributions to a Roth IRA will increase to between $146,000 and $161,000 for singles and heads of household, up from between $138,000 and $153,000.

For married couples filing jointly, the income phase-out range will increase to between $230,000 and $240,000, up from between $218,000 and $228,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and will remain between $0 and $10,000.

Saver’s Credit

The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers will be $76,500 for married couples filing jointly, up from $73,000; $57,375 for heads of household, up from $54,750; and $38,250 for singles and married individuals filing separately, up from $36,500.

The amount individuals can contribute to their SIMPLE retirement accounts will be increased to $16,000, up from $15,500.

The minimum threshold for employees to qualify as a highly compensated employee will increase to $155,000 in 2024, up from $150,000.