IRS Announces changes in Retirement Plan limits for 2024

The Internal Revenue Service has announced that the amount individuals can contribute to their 401(k) plans in 2024 increases to $23,000, up from $22,500 for 2023. The IRS also has issued technical guidance regarding all the cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items. The $23,000 contribution limit is not just for employees who participate in 401(k) plans, but also includes 403(b) and most 457 plans, as well as the federal government’s Thrift Savings Plan.

The limit on annual contributions to an IRA increases to $7,000, up from $6,500. The IRA catch‑up contribution limit for individuals aged 50 and over was amended under the SECURE 2.0 Act of 2022 to include an annual cost‑of‑living adjustment that remains $1,000 for 2024.

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b) and most 457 plans, as well as the federal government’s Thrift Savings Plan, remains $7,500 for 2024. Therefore, participants in 401(k), 403(b) and most 457 plans, as well as the federal government’s Thrift Savings Plan, who are 50 and older can contribute up to $30,500, starting in 2024. The catch-up contribution limit for employees 50 and over who participate in SIMPLE plans remains $3,500 for 2024.

The income ranges for determining eligibility to make deductible contributions to traditional individual retirement arrangements, to contribute to Roth IRAs and to claim the Saver’s Credit all increased for 2024.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced — or phased out — until it is eliminated, depending on filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase‑out ranges for 2024:

• For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $77,000 and $87,000, up from between $73,000 and $83,000.
• For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $123,000 and $143,000, up from between $116,000 and $136,000.
• For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to between $230,000 and $240,000, up from between $218,000 and $228,000.
• For a married individual filing a separate return who is 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.

Roth phase-out changes

The income phase-out range for taxpayers making contributions to a Roth IRA is increasing 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 is increasing 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 remains between $0 and $10,000.

The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low and moderate income workers is $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 is increasing to $16,000, up from $15,500.

Please reach out to your LMC professional for any specific questions you may have.