Every year, many anticipate updates from the Internal Revenue Service (IRS) regarding retirement savings. In this article, we’ll delve into the 2024 IRS Contribution limits and explore why they’re so essential for your employees’ retirement planning.
At Paper Trails, it is our duty to keep employers and HR people, like you, up to date on announcements made by the IRS and other government agencies. By the time you finish reading this article, you will be aware of the changes coming in 2024. With this knowledge, your employees will be able to maximize their retirement savings and your business will be able to remain in compliance with government regulations. Let’s get started.
What are contribution limits?
Contribution limits refer to the maximum amount an individual can contribute to a specific retirement account in a given year. These limits are established by the IRS and apply to various types of retirement accounts, such as IRAs, 401(k)s, and SEP-IRAs. By setting these limits, the IRS aims to ensure that tax-advantaged retirement savings opportunities are available to as many individuals as possible, while also maintaining fairness in the tax system.
Why do contribution limits increase each year?
Typically, contribution limits rise to keep pace with inflation, allowing individuals to save more without losing purchasing power. Additionally, regular adjustments to the contribution limits can help individuals meet their retirement goals, especially as the cost of living and life expectancies increase. In 2023, the limits significantly increased based on inflation, but the limits for 2024 aren’t quite as aggressive.
**Note that the Secure Act 2.0 passed in 2022 will eventually change catch-up contributions in significant ways. The 401(k)/403(b) catch-up for those 50+ has always been indexed to inflation. But originally the law stated that, starting in 2024, if you have a Modified Adjusted Gross Income of $145,000+ (indexed to inflation), those catch-up contributions would now have to come on the Roth side. That means tax-deferred catch-up contributions would no longer be allowed for these high earners. In August 2023, though, the IRS announced that it was pushing back that provision until 2026. That means for the next few years, your catch-up contributions can come either via the traditional method or via Roth.**
What are the 2024 IRS contribution limits?
The below chart compares the 2023 limits with the new 2024 limits.
| 2024 Limit | 2023 Limit | ||
| SIMPLE IRA Deferral | $16,000 | $15,500 | + $500 |
| SIMPLE IRA Catch-Up (Over 50) | $3,500 | $3,500 | no charge |
| 401(k)/403(b)/457 Deferral | $23,000 | $22,500 | + $500 |
| 401(k)/403(b)/457 Catch-Up (Over 50) | $7,500 | $7,500 | no change |
| 401(k)/403(b)/457 Contribution Limit (employee + employer) | $69,000 | $66,000 | + $3,000 |
| 401(k)/403(b)/457 Contribution Limit (employee + employer) (Over 50) | $75,500 | $73,500 | + $2,000 |
| Traditional IRA/Roth IRA Contribution Limit | $7,000 | $6,500 | +$500 |
| 401(a)(17) Employee Compensation Limit | $345,000 | $330,000 | + $15,000 |
Additional changes to 2024 contribution limits
Other changes in 2024 include:
Traditional IRA income phase-out ranges for 2024:
- $77,000 to $87,000 for single taxpayers
- $123,000 to $143,000 for married couples filing jointly
Roth IRA income phase-out ranges for 2024:
- $146,000 to $161,000 for single taxpayers and heads of household
- $230,000 to $240,000 for married couples filing jointly
2024 401(k) contribution and catch-up limits
For 2024, the 401(k) contribution limits are seeing a practical increase, making saving for retirement a bit easier. If you’re under 50, you can now contribute up to $23,000, a slight rise from 2023’s $22,500 limit. And for those 50 or older, while the catch-up contribution stays at $7,500, this means you can put away up to $30,500 in 2024. These updated IRS Contribution limits are great news for anyone looking to boost their retirement savings in a manageable way.
2024 SIMPLE IRA contribution and catch-up limits
Those employees of employers offering a SIMPLE IRA will have the opportunity to contribute more in 2024. The contribution limit has been raised to $16,000, up from $15,500 in 2023. This increase provides a helpful boost for individuals looking to enhance their retirement funds. Additionally, the catch-up contribution limit for those aged 50 or over remains consistent at$3,500, allowing for additional savings. These changes in the 2024 IRS Contribution limits are a positive step for anyone using a SIMPLE IRA to secure their financial future.
2024 Roth IRA contribution and catch-up limits
For 2024, Roth IRA savers can look forward to an encouraging update in their contribution capabilities. The annual contribution limit has increased to $7,000, up from $6,500 in 2023, offering a helpful lift for those building their retirement nest egg. For individuals aged 50 and over, the catch-up contribution remains steady, allowing for an additional $1,000, bringing the total possible contribution to $8,000. These adjustments in the 2024 IRS Contribution limits are a beneficial move for anyone investing in a Roth IRA, providing a stronger foundation for future financial security.
HSA and FSA Contribution Limits
The IRS has also increased some of the contribution limits on health saving accounts (HSAs) and flexible spending accounts (FSAs) for 2024. Those limits are as follows.
| 2024 Limit | 2023 Limit | Yearly Change | |
| HSA Contribution Limit (Self) | $4,150 | $3,850 | + $300 |
| HSA Contribution Limit (Family) | $8,300 | $7,750 | + $650 |
| HSA Catch-Up Contribution(Over 55) | $1,000 | $1,000 | None |
| FSA Maximum Deferral | $3,200 | $3,050 | + $150 |
Conclusion
Staying informed about the 2024 IRS Contribution limits can significantly impact your employees’ retirement planning. By understanding and leveraging these updated limits, you and your employees can maximize savings and ensure a more secure financial future. Remember, it’s not just about saving but saving smartly! Stay tuned for updates as more limits are released by the IRS.