Retirement Plan Limits Rise for 2024, IRA Contributions Continue Until Tax Deadline

Have you heard the good news? The IRS announced late last year that the amount individuals can contribute to their 401(k) plans in 2024 has increased to $23,000, up from $22,500 for 2023. The catch-up contribution limit for aged 50 and over remains at $7,500. This means if you are 50 yrs or older you can contribute up to $30,500, starting in 2024! The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans also remains at $3,500, for 2024.

And IRA limits on annual contributions also 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 it remains at $1,000.

But there’s more good news! You still have time to take advantage of contributions to your retirement accounts for tax year 2023. While the December 31, 2023 deadline for 401(k) contributions has passed, you can still put money into either traditional or Roth individual retirement accounts (IRAs), up until the tax deadline of April 15, 2024.

Contributions can also be made to employee-based plans including simplified employee pension plan (SEP) IRAs and savings incentive match plan for employees (SIMPLE) IRAs. You have up until the due date of your business’s income tax return for the year, including extensions. Traditional IRA contributions are also tax deductible, which lowers your taxable income for 2023. Tax deductions for IRAs do have some restrictions, however, including your income and whether you participate in a workplace retirement plan already.

You should also keep in mind that your total contributions for traditional and Roth IRA accounts are limited to $6,500 for 2023. Those 50 and older can contribute an additional $1,000 for a total of $7,500. If you go over, you’ll owe a 6% tax each year on the excess amount in your account.

And if you have a Roth IRA, remember there are contribution limits based on how much money you make. For single filers in tax year 2023, the amount you’re allowed to contribute begins phasing out in increments if you earn $138,000 or more, stopping completely if you earn $153,000 or more.

For joint filers in tax year 2023, the range is $218,000 to $228,000. More information on contribution limits can be found on the IRS webpage HERE.

SEP and SIMPLE IRAs have more generous 2023 contribution limits. SEP contributions can’t exceed the lesser of either 25% of the employee’s compensation, or $66,000. SIMPLE plans have 2024 contribution limits of $15,500.

More tips: If you are making 2023 IRA contributions in 2024, be sure to specify that it’s for 2023 with your IRA custodian. Did you forget about 401(k) plans from previous jobs? Do you have any retirement accounts collecting dust? Keeping track of these can help you get the most out of the money you’ve already saved. If you do find money you’d forgotten about in an old plan, we can educate you on your options.

CONTACT US: The 401(k) contribution limit for 2024 is $23,000 for employee contributions and $69,000 for combined employee and employer contributions. The advantage to maximizing retirement contributions for the year is that these accounts allow your retirement savings to grow faster with compound interest. The earlier you contribute, the more time your money has to grow. We have other great ideas to help your nest egg grow. Contact Cory Lyon, TFG Financial Advisor, at 561-209-1120 or clyon@tfgfa.com.

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