The Internal Revenue Service (IRS) announced increases to the 401(k) and IRA contribution limits for 2024.
401(k) and Roth Contribution Limits: $500 Increase
The IRS raised the standard 401(k) contribution limit from $22,500 to $23,000 (+2.2%). It also raised the IRA contribution limit from $6,500 to $7,000 (+7.7%).
Those are modest increases compared to last year, when inflation raged much higher. The IRS announced a record 401(k) contribution limit increase of $2,000 this time a year ago (+9.8%).
If you’re at least 50 years old, you can make an additional $7,500 in 401(k) catch-up contributions. That figure did not increase this year. So the total amount you can contribute to a 401(k) in 2024 if you’re at least 50 years old is $30,500.
All of those catch-up contribution rules apply to 403(b), Thrift Savings Plan and most 457 plan participants.
Keep in mind that the $23,000 (or $30,500 for those 50 and older) is the total amount you can contribute to 401(k) plans even if you work for more than one company.
Roth IRA Eligibility Income Limits for 2024
Clark calls himself "the man from Roth" and frequently professes his love for Roth IRAs. However, not everyone is eligible to contribute to a Roth IRA due to income limits.
The IRS did increase those income limits for 2024. There’s a gradual “phase-out” range where you’re still allowed to make contributions to a Roth IRA (but not the full $7,000). Above the phase-out range, you aren’t eligible for Roth IRA contributions.
Here are the new income limits:
- Single taxpayers: Phase-out range now $141,000 to $161,000
- Married filing jointly: Phase-out range now $230,000 to $240,000
- Married filing separately: Phase-out range still $0 to $10,000
Clark’s Advice for Retirement Saving and Investing via 401(k) Plans and IRAs
If you have an emergency fund for unexpected expenses and you're living on less money than you make, you're ready to invest. The very first thing you should do is contribute enough to your workplace 401(k) to secure the full company 401(k) match, Clark says.
Even if you aren’t a max saver who is contributing up to the 401(k) limit, you should contribute enough to secure this additional money.
“The beauty of an employer match is that it’s the equivalent of an automatic pay raise,” Clark says.
For most people (as long as your 401(k) plan isn’t extraordinarily expensive in fees), increasing your 401(k) contributions up to the maximum limit is your next step to investing for retirement.
If you’re already reaching the max 401(k) contribution limit in 2023, you’ll be able to save an extra, tax-advantaged $500 next year.
You can make 2023 401(k) and IRA contributions through April 15, 2024. But remember, if you hit your maximum limit prior to the end of 2023, you could lose out on any company match for the rest of this year.
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