If paying taxes on your investments is something you like to put off as long as possible, the IRS just gave you a way to shield an additional $1,000.
This week the IRS pushed the 401(k) contribution limit for 2024 up by $500 to $23,000. Additionally, the IRS also upped the 2024 contribution limit for IRA accounts by $500 to $7,000. But the "catch-up" contributions for savers aged 50 and older stay the same. For 401(k) contributions that's $7,500 and $1,000 for IRA contributions.
You can stack both increases for a total $1,000 additional to put in retirement accounts. And this year tax-deferred accounts are even more valuable. If you've bought bonds, putting them in your tax-deferred accounts will delay the tax bill on the growing levels of interest.
Pay Now, Play Later With Contribution Limits
Contribution limits generally rise yearly. But next year's increases are on the smallish side, and smaller than for 2023. The 401(k) limit for 2023 rose $2,000 plus an another $1,000 for catch-up contributions. Meanwhile, the 2023 IRA contribution limit rose $500 to $6,500, while the catch-up contribution stayed at $1,000.
Retirement account contribution limits for 2024 aren't up as much as in years past. But these are healthy increases that could pay off over time. Contributions made to traditional 401(k) plans and IRAs grow tax-free until the money is withdrawn, when they are taxed at your future tax rate.
Additionally, withdrawals from Roth IRA and 401(k) plans are tax-free. That's because the contributions are made with after-tax dollars. Either way, the new limits give investors more ways to save.
Stacking 401(k)s On IRAs
If you don't have access to a 401(k) at work, the IRA is one of your most powerful savings tools. But don't think you're only limited to saving $500 more next year if you have a 401(k) at work. IRS rules let you save money in both a 401(k) and IRA within certain limits. In fact, the IRS made the rules more lenient in 2024 for anyone looking to save in both a 401(k) and IRA.
For single taxpayers covered by a work retirement plan, you can deduct a portion of your IRA contributions between a phase-out range of $77,000 and $87,000 in annual income for 2024. That's up from a phase-out range in 2023 from $73,000 to $83,000. For married couples filing jointly, the new IRA phase out range is from $123,000 to $143,000. That's up from the previous range of $116,000 to $136,000.
And even if you're beyond the phase-out range, you can still fund a nondeductible IRA in addition to your 401(k).
So, if you're not taking advantage of retirement accounts, 2024 gives you 1,000 more reasons to do it.
401(k) Contribution Limits From 2015-2024
| Year | Basic Contribution Limit | Catch-Up Contribution (50 Or Older) |
|---|---|---|
| 2024 | $23,000 | $7,500 |
| 2023 | $22,500 | $7,500 |
| 2022 | $20,500 | $6,500 |
| 2021 | $19,500 | $6,500 |
| 2020 | $19,500 | $6,500 |
| 2019 | $19,000 | $6,000 |
| 2018 | $18,500 | $6,000 |
| 2017 | $18,000 | $6,000 |
| 2016 | $18,000 | $6,000 |
| 2015 | $17,500 | $6,000 |
| 2014 | $17,500 | $5,500 |
| 2013 | $17,000 | $5,500 |
| 2012 | $16,500 | $5,500 |
IRA Contribution Limits From 2010 to 2024
| Year | Your Basic Contribution | Catch-Up Contribution (If You're 50 Or Older) | Nonworking Spouse Contribution |
|---|---|---|---|
| 2024 | $7,000 | $1,000 | $6,000 |
| 2023 | $6,500 | $1,000 | $6,000 |
| 2022 | $6,000 | $1,000 | $6,000 |
| 2021 | $6,000 | $1,000 | $6,000 |
| 2020 | $6,000 | $1,000 | $6,000 |
| 2019 | $6,000 | $1,000 | $6,000 |
| 2018 | $5,500 | $1,000 | $5,500 |
| 2017 | $5,500 | $1,000 | $5,500 |
| 2016 | $5,500 | $1,000 | $5,500 |
| 2015 | $5,500 | $1,000 | $5,500 |
| 2014 | $5,500 | $1,000 | $5,500 |
| 2013 | $5,500 | $1,000 | $5,500 |
| 2012 | $5,000 | $1,000 | $5,000 |
| 2011 | $5,000 | $1,000 | $5,000 |
| 2010 | $5,000 | $1,000 | $5,000 |
