As we approach the dawn of 2024, individuals planning for their retirement find themselves faced with a significant development – the inflation adjustments to retirement account limits. Annually, the Internal Revenue Service (IRS) evaluates the economic landscape and makes adjustments to various financial thresholds to account for inflation. This ensures that the limits governing retirement contributions remain relevant and realistic. Let’s delve into the key changes set to take effect in 2024 and explore how they might impact your retirement planning.
The amount that individuals can contribute to Sec. 401(k) plans will increase to $23,000 in 2024, up from $22,500 in 2023. The new amount also applies to Sec. 403(b) and most Sec. 457 plans, as well as the federal government’s Thrift Savings Plan.
The limit on annual contributions to traditional and Roth IRAs increased to $7,000, and the IRA catch-up contribution limit for individuals 50 and older remains $1,000 for 2024.
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The catch-up contribution limit for employees 50 and older who participate in 401(k), 403(b), and most 457 plans, and the federal government’s Thrift Savings Plan, remains $7,500 for 2024. This means that participants in these plans who are 50 and older can contribute up to $30,500 in 2024, the IRS said.
The amount individuals can contribute to their SIMPLE plan is increased to $16,000, up from $15,500. The catch-up contribution limit for employees 50 and older who participate in SIMPLE retirement accounts remains $3,500 for 2024.
The income ranges for determining eligibility to make deductible contributions to traditional individual retirement arrangements (IRAs), 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.)
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