IRS Releases Retirement and Benefit Plan Inflation Adjustments

On November 1, the Internal Revenue Service (IRS) released inflation-adjusted retirement and benefits plan contribution limits for 2024. Next year, 401(k) savers will be allowed to contribute $500 more than they can in 2023.

The retirement savings plan inflation adjustments for 2024 include:

• 401(k) contribution limit will go from $22,500 to $23,000.
• The catch-up contribution limit will go to $7,500 in 2024.
• 403(b) and most 457 plans will also see an increase in their contribution limit to $23,000.
• IRA contribution limits—both traditional and Roth—will go up from $6,500 in 2023 to $7,000 in 2024.
• IRA catch-up contributions will remain limited to $7,000 next year.

Also announced were inflation adjustments to the phase-out levels applicable to traditional IRAs. They are:

• For single taxpayers covered by an employer-sponsored retirement plan, tax-deductible IRA contributions are available only to those earning between $77,000 and $87,000 in 2024—that is up from this year’s income limit of between $73,000 and $83,000.
• For married couples filing jointly, if the spouse making the contribution participates in an employer plan, the deduction phases down and then out at incomes between $123,000 and $143,000 in 2024—up from the 2023 phase-out range of $116,000 and $136,000 in 2023.
• Traditional IRA contributors not covered by an employer plan who are married to someone who is covered, the phase-out range increases to $230,000 to $240,000 in 2024, an increase from between $218,000 and $228,000 in 2023.

Phase-outs only apply if the traditional IRA contributor is or is married to someone who can participate in an employer-sponsored retirement savings plan.

Roth IRA contributors are also subject to income limits on how much they can contribute. Those limits are also indexed for inflation. The 2024 limits are:

• For single and head of household Roth IRA owners, permissible contributions phase out at incomes between $146,000 and $161,000 (up from $13,000 and $153,000 in 2023).
• Married couples filing jointly can contribute to Roth IRAs if their incomes are below $240,000 (with a phase-out starting at $230,000)—that is an increase of a phase-out range of $218,000 and $228,000 in 2023.

SIMPLE plan contribution limits go to $16,000 (up from $15,500) in 2024. The SIMPLE catch-up contribution limit stays the same in 2024--$3,500.

Defined benefit plan benefits can top out at $275,000 in 2024, a $10,000 increase over the 2023 limit. In 2024, the savers credit income limits are $76,500 for married couples filing jointly, up from $73,000 in 2023. The limit increases to $57,375 for heads of household in 2024, up from $54,750 in 2023. And, for singles and married couples filing separately, the amount increases to $38,250 in 2024, up from $36,500 in 2023. A qualified charitable deduction (the amount you can give to a charity from a qualified retirement plan and have it count towards your minimum required distribution) goes from $100,000 in 2023 to $105,000 in 2024. The one-time election for a qualified charitable deduction for a gift to a split interest entity adjusts for inflation from $50,000 to $53,000 in 2024.

 Cafeteria plan contribution limits go to $3,200 in 2024, the IRS also announced, with a maximum carryover amount of $640.

For all inflation adjustments, see https://www.irs.gov/pub/irs-drop/rp-23-34.pdf.

NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.