Retirement contribution limits for 2024 have increased, benefiting savers with Individual Retirement Accounts (IRAs) and 401(k)s. These tax deferred accounts are cornerstone elements for a secure retirement, providing tax advantages that can significantly benefit your financial future. Here’s an updated guide to the contribution limits and rules for 2024, ensuring you’re fully equipped to make informed decisions about your retirement savings strategy.

Updated Contribution Limits for 2024

The updated contribution limits for 2024 are for retirement accounts including IRA, Roth IRA, SEP IRA, SIMPLE IRA and 401(k).

401(k) and 403(b) Accounts: For 2024, the contribution limit for 401(k) and 403(b) accounts has been set at $23,000. If you are over the age of 50, the IRS offers an additional catch-up contribution of $7,500, allowing older savers to further bolster their total retirement contribution to $30,500. This presents an excellent opportunity for individuals to maximize their investment savings, and potentially their tax savings as they approach retirement.

SEP IRA: For 2024, employers can contribute up to 25% of an employee’s total compensation or a maximum of $69,000, whichever is less. For self-employed individuals, the contribution limit is typically capped at 20% of net income, after adjusting for the self-employment tax. This calculation takes into account the maximum eligible compensation, which is $345,000 for 2024. The SEP IRA’s generous contribution limits make it a powerful tool for individuals aiming to significantly enhance their retirement savings.

SIMPLE IRA: In 2024, the contribution limit for SIMPLE IRAs has been raised to $16,000. This enhancement allows participants to set aside more funds for retirement. Additionally, workers aged 50 or older have the opportunity to make catch-up contributions of $3,500, bringing their total contribution potential to $19,500. These limits apply equally to self-employed individuals, offering a robust saving avenue with a simpler administrative framework compared to other retirement plans.

IRA and Roth IRA: The contribution limit for both IRA and Roth IRA accounts in 2024 is $7,000. For individuals aged 50 and over, there’s an additional catch-up contribution of $1,000, permitting a total contribution of $8,000. This increase allows for a greater amount of savings to be put away, growing tax-free or tax-deferred, depending on the type of account.

Income Limits for Roth IRA Contributions

The IRS has also updated the income limits for Roth IRA contributions for 2024. If you file as a single person, your Modified Adjusted Gross Income (MAGI) must be under $161,000 to contribute to a Roth IRA. For married couples filing jointly, the MAGI limit is $240,000. These adjustments ensure that Roth IRAs remain accessible to a wide range of earners, providing a valuable tool for tax-free growth and withdrawals in retirement.

SECURE 2.0 Act: 529 Rollover Assets

A significant update for 2024, courtesy of the SECURE 2.0 Act, is the eligibility to contribute to your Roth IRA using 529 rollover assets. This flexibility allows for a strategic reallocation of funds intended for education purposes towards retirement savings, should the original 529 funds not be fully utilized. It’s important to note that traditional IRAs do not qualify for this option, and consulting with a tax advisor is recommended to navigate this new opportunity.

Maximizing Your Contributions

With the increased retirement contribution limits and expanded eligibility options, 2024 offers ample opportunity to be maximizing your contributions. Whether you’re contributing to a 401(k), an IRA, or taking advantage of the new 529 rollover option, adjusting your savings strategy to align with these updates can significantly impact your financial readiness for retirement.

If you’re already maximizing your contributions, the increased limits allow you to save even more. For those not yet contributing the maximum, consider adjusting your budget to take full advantage of these tax-advantaged accounts. Remember, the sooner you start or increase your contributions, the more you’ll benefit from compound growth over time.

Staying Informed

As contribution limits and tax laws continue to evolve, staying informed is key to optimizing your retirement savings strategy. Regularly reviewing your retirement savings plan and adjusting your contributions in line with the latest limits and regulations will help ensure you’re on the best path to achieving your savings goals.

The increased contribution limits and expanded eligibility for Roth IRA contributions in 2024 present valuable opportunities for savers. By taking strategic steps now, you can secure a more comfortable and financially stable retirement.