IRS Announces Retirement Plan Benefit Increases
Retirement Planning Update: Key Changes to Contribution Limits and Income Phase-Outs in 2024
Get ready for some good news, retirement savers! The IRS has adjusted various contribution limits and phase-out thresholds for 2024, giving you more flexibility and tax breaks to build your nest egg. From higher contribution caps for 401(k)s and IRAs to expanded income ranges for deductions and credits, there’s something for everyone to benefit from. We dive into the details and see how these changes can impact your retirement planning in the new year.
Contributions to 401(k) and 403(b) Plans
Taxpayers will be able to contribute up to $23,000 in 2024, up from $22,500 in 2023. The catch-up contribution amount for those age 50 and older will remain $7,500.
IRAs
The limit on annual contributions to traditional and Roth IRAs will increase to $7,000 in 2024, up from $6,500 in 2023. The extra catch-up contribution for those age 50 and older will remain $1,000.
Phase-out amounts for traditional IRAs
The deduction for taxpayers making contributions to a traditional IRA will phase out in 2024 for singles who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $77,000 and $87,000, up from $73,000 and $83,000 in 2023.
For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the 2024 income phase-out range will be $123,000 to $143,000, up from $116,000 to $136,000 in 2023.
For an IRA contributor who isn’t covered by a workplace retirement plan and is married to someone who is covered, the deduction will phase out in 2024 if the couple’s income is between $230,000 and $240,000, up from $218,000 and $228,000 in 2023. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range isn’t subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Phase-out amounts for Roth IRAs
The 2024 AGI phase-out range for married couples filing jointly and making contributions to a Roth IRA will be $230,000 to $240,000, up from $218,000 to $228,000 in 2023.
For single taxpayers, the 2024 income phase-out range will be $146,000 to $161,000, up from $138,000 to $153,000 in 2023. For a married individual filing a separate return, the phase-out range isn’t subject to an annual cost-of-living adjustment and will remain $0 to $10,000.
The 2024 AGI limit for the saver’s credit
Also known as the retirement savings contribution credit, the 2024 AGI limit for the saver’s credit for low and moderate-income workers will be $76,500 for married couples filing jointly, up from $73,000 in 2023. For heads of household, it will be $57,375, up from $54,750; and for married individuals filing separately and for singles, it will be $38,250, up from $36,500.
Here are some other 2024 retirement plan amounts, as compared with 2023:
| Qualified Plan Limits | 2024 | 2023 |
|---|---|---|
| Defined Contribution Plan Dollar limit on additions on Sections 415(c)(1)(A) | $69,000 | $66,000 |
| The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) | $275,000 | $265,000 |
| Annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C) and 408(k)(6)(D)(ii) | $345,000 | $330,000 |
| SIMPLE deferrals under Section 408(p)(2)(E) | $16,000 | $15,500 |
| SIMPLE catch-up contributions for those age 50 and older | $3,500 | $3,500 |
| Compensation defining highly compensated employee under Section 414(q)(1)(B) | $155,000 | $150,000 |
| Compensation defining key employee in a top-heavy plan under Section 416(i)(1)(A)(i) | $220,000 | $215,000 |
| Compensation triggering Simplified Employee Pension contribution requirement under Section 408(k)(2)(C) | $750 | $750 |
With these new changes in place, 2024 presents a golden opportunity to boost your retirement savings and reach your financial goals. Take advantage of these increased limits by adjusting your contributions, reviewing your investment strategies, and maximizing your tax benefits. Remember, a healthy retirement doesn’t happen overnight — it’s built with consistent effort and informed decisions. So, take action today, explore your options, and pave the way for a comfortable and secure future. Your golden years will thank you for it!
If you have questions about these or other tax issues, contact your Brady Ware tax advisor.
