2024 Retirement Account Contribution Limits

For 2024, the IRS brings another round of increases to retirement plan contributions limits.  I’ve said this before and I’ll say it again, we have a retirement crisis in this country so allowing people to save more in tax advantaged accounts will only help them in the long-term.  

Updated 2024 Contribution Limits

The contribution limits on all retirement accounts went up: IRA, Roth IRA, 401(k), 403(b) and SIMPLE IRA.   Savers over 50 will still be eligible for a $1,000 catch-up allowance.  In future years, this $1,000 catch-up allowance will be automatically adjusted for inflation. Health Savings Accounts (HSA), a favorite retirement savings vehicle for me, gets a 7.1% increase from 2023.  You are still able to make a $1,000 catch-up contribution to your HSA if you are age 55 or higher.  Remember, both you and your spouse may make catch-up contributions to their respective HSAs.  

In summary, you may contribute up to $7,000 to an IRA ($8,000 if you are age 50 or older).  You may contribute $23,000 to an employer sponsored retirement account, i.e., 401(k), 403(b), or SAR-SEP ($30,500 if you are age 50 or older).  To be eligible for the catch-up allowance of $7,500, you just need to turn 50 during this calendar year.  If you are 49 today, yet turn 50 on December 31, you are eligible for the full catch-up provision for the entire year.

A breakdown of changes are as follows:

The defined contribution plan limits (401(k), 403(b)) increases from $66,000 to the lesser of $69,000 or 100% of compensation (this includes employee and employer contributions).

Health Savings Account Limits

I love Health Savings Account, and frankly, you should too.  I view them as the best type of retirement account as you get a tax deduction on any contribution AND if invested, all the growth grows tax-fee (if used for healthcare expenses).  Check my blog post on how I think about HSAs: First Save.  Then Invest.  Decades Later, Reimburse.  

Roth IRA Compensation Restrictions

The income phase-out range for making Roth IRA contributions has also increased.  Taxpayers with modified adjusted gross income (MAGI) under the lower end of the ranges shown below can make a full Roth IRA contribution.  If you are in the range, you will only be able to contribute a portion of the $7,000 max.  These limits do not apply to making Roth 401(k) contributions if your employer allows it.  

If your income is too high for the year, consider a backdoor Roth IRA contribution.  I do these for my high wage earning clients.  It’s not much each year but over many decades, you can easily achieve many hundreds of thousands of dollars in tax-free monies which will lower your lifetime tax bill and give you much flexibility with regards to retirement income planning in future years.

If you plan to save the max to your employer sponsored plan this year, be sure to review and potentially change your payroll deferral percentages.  Also, if you turn the big five-zero this year, don’t forget about the catch-up provisions.  

A full two page 2024 tax cheat sheet can be downloaded Important-Numbers-2024.pdf.  I keep a copy handy at all times.

Happy New Year and Happy Savings!