Navigating the 2024 IRS Adjusted 401(k) and IRA Contribution Limits
As we approach the end of the year, it's important to stay updated on the latest financial news, especially when it concerns your retirement savings. The IRS has recently announced some adjustments to the contribution limits for 401(k) and Individual Retirement Accounts (IRAs) for the year 2024. These changes are the result of the SECURE 2.0 act changes voted in by Congress in 2022 can have an impact on your retirement planning and financial goals. Let’s break down the new limits and what they can mean for your retirement strategy.
401(k) Contribution Limits (1)
For 2024, the IRS has increased the annual contribution limits for 401(k) plans, as well as 403(b) and many 457 plans. These adjustments are in response to changes in the cost of living and inflation, aiming to help individuals save more for retirement. Here's a breakdown of the new limits:
401(k) Pre-Tax and Roth Contributions: The annual contribution limit for 401(k) plans, which includes both pre-tax and Roth contributions, has been raised to $23,000, up from $22,500.
Catch-Up Contributions: Individuals aged 50 older and who participate in the aforementioned 401(k), 403(b), and many 457 plans will be able to contribute up to $7,500 annually, an amount that remains unchanged from 2023.
IRA Contribution Limits (1)
For traditional and Roth IRAs, the annual contribution limit in 2024 will rise to $7,000 in 2024, a $500 jump from the 2023 limit of $6,500. The catch-up contribution for people aged 50 and over will remain unchanged at $1,000 in 2024. Income caps for Roth IRA contributions will also rise to $161,000 for individuals, up from 2023’s $153,000.
What Do These Changes Mean for You?
With higher 401(k) contribution limits, consider increasing your contributions if your financial situation allows. By taking advantage of these new limits, you can contribute more over the long-term to your portfolio.
Additionally, IRAs remain a vital part of retirement planning, and allow savers to diversify how they save, particularly with regard to their unique tax status, so you should consider including in your retirement portfolio contributions to both a 401(k) and an IRA.
Also, if you're aged 50 or older, make use of the catch-up contributions. This extra cushion can help make a difference in your retirement nest egg.
Lastly, make sure you’re reviewing your portfolio with your advisor regularly. As you increase your contributions or change the ways in which you’re saving, make sure your investment strategy aligns with your risk tolerance and financial goals. These changes are a great reminder that now is a good time to consult a financial advisor.
If you have questions or want to discuss more of the changes and updates in detail, please contact us to schedule a conversation with a registered investment advisor.*
(1) https://www.irs.gov/newsroom/401k-limit-increases-to-23000-for-2024-ira-limit-rises-to-7000
*Registration does not imply a level of skill or training.
