You Can Save More Money in Your Retirement Accounts in 2024
Good news for savers: The IRS announced yesterday that next year’s contribution limits for 401(k)s and other tax-advantaged retirement plans are increasing to account for inflation. Since it’s always a good idea to maximize your retirement contributions , let’s take a look at what these new limits are for the 2024 tax year.
What will change in pension savings in 2024
401(k) contributions
The amount people can contribute to their 401(k) plans in 2024 increased to $23,000, up from $22,500 in 2023. This contribution limit also applies to similar employer-sponsored retirement accounts, such as 403(b) plans, most 457 plans, and the federal government’s Employee Savings Plan.
IRA contributions
The annual IRA contribution limit will be $7,000 in 2024, up from $6,500 in 2023. These contribution limits apply to the total amount of contributions you make each year to all of your traditional and Roth IRAs.
Catch-up contributions
If you’re at least 50 years old, the extra contribution rules allow you to add more money to your retirement savings accounts than the standard contribution limit for the year. The catch-up contribution limit for employees age 50 and older is now an additional $7,500 for 2024. This gives anyone who has deferred their pension contributions (or who has not yet started saving) the opportunity to ‘catch up’ before reaching retirement age.
IRA plans also allow additional contributions for those age 50 and older—that amount will remain $1,000 for 2024. Combined with the $7,000 limit, that adds up to $8,000 for workers age 50 and older.
What else do you need to know
Please remember that attempting to deposit more than the annual limit will result in a 6% tax penalty on the excess amount unless it is removed immediately. If you exceed your contribution limits, you have until the tax return deadline and extension to withdraw the excess contributions and any income they generated.
The bottom line is that this increase in contributions is great news for your retirement planning. As always, you can and should exceed these limits as much as possible if possible.
When it comes to retirement, the key is to start saving as early as possible ( rules of compounding !) and use a combination of these accounts to build your retirement funds. Here are our guides to opening an IRA and opening a 401(k) .