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Good news: 401(k) limit increases to $23,000 for 2024

Posted on November 20, 2023

According to Mike Poynter of Teipen CPA Group, the amount individuals can contribute to their 401(k) this coming year has increased to $23,000 (up from $22,500 for 2023).

There is also new technical guidance regarding cost of living (COLA) adjustments affecting dollar limitations for pensions and other retirement-related plans for tax year 2024.

Here are the highlights for 2024

  • The contribution limit for employees who participate in 401(k), 403(b), and most 457 plans, as well as the federal government’s Thrift Savings Plan is increased to $23,000, up from $22,500.
  • The limit on annual contributions to an IRA increased 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, but remains $1,000 for 2024.
  • Catch up contribution limits for employees 50+ who participate in 401(k), 403(b), most 457 plans, and Thrift Savings Plan remains $7,500 for 2024.
  • The catch-up contribution limit for employees 50+ who participate in SIMPLE plans remains $3,500 for 2024.

Income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), Roth IRAs, and to claim the Saver’s Credit all increased for 2024.

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.)

New 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, but 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.
  • The income phase-out range for taxpayers making contributions to a Roth IRA is increased 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 increased 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.

  • Contributions to SIMPLE retirement accounts is increased to $16,000, up from $15,500.

To say the least, it’s complicated! Need help understanding what applies to you? Ask to speak with one of our CPAs. Or go to IRS.gov Notice 2023-75 for details on these and other retirement-related cost-of-living adjustments for 2024.