The Internal Revenue Service (IRS) has recently unveiled the anticipated changes to investor contribution limits for various retirement accounts in 2024, signaling a significant impact on retirement savings strategies. These adjustments particularly pertain to 401(k) plans and individual retirement accounts (IRAs), influencing both contribution limits and income ranges.
For 401(k) plans, the employee contribution limit is slated to increase to $23,000 in 2024, marking a rise from the previous year’s $22,500. Simultaneously, catch-up contributions for individuals aged 50 and older will remain at $7,500. This adjustment extends to other retirement accounts such as 403(b) plans, most 457 plans, and Thrift Savings Plans.
For IRAs, the contribution limits have been elevated, allowing investors to contribute up to $7,000 in 2024 compared to $6,500 in 2023. The unchanged catch-up contribution for IRAs is set at $1,000. Notably, an increased adjusted gross income phaseout range for both single individuals and heads of households may expand eligibility for Roth IRA contributions in 2024.
The Roth IRA contribution phaseout for married couples filing jointly has also been adjusted, now ranging between $230,000 and $240,000 in 2024, as opposed to the previous range of $218,000 to $228,000. These alterations open doors for more individuals and families to leverage retirement savings options.
IRS has widened income ranges
In addition to heightened contribution limits, the IRS has widened income ranges for qualifying for the retirement savings contributions credit and the deductibility of pretax IRA deposits in the presence of a workplace plan. These changes aim to enhance financial flexibility and provide individuals with opportunities to optimize their retirement savings.
Financial advisors stress the importance of integrating these changes into year-end financial planning strategies. As the year concludes, individuals are encouraged to consider these revised contribution limits and income ranges, making informed decisions about their retirement savings.
n advisor underscores the significance for high-net-worth clients to stay informed about these changes, stating, “It’s crucial for high-net-worth clients to be aware of these changes and consider how they can optimize their retirement savings in light of the new limits and income ranges.”
The announcement by the IRS regarding increased contribution limits for 401(k) plans, IRAs, and other retirement accounts provides individuals with an opportunity to reevaluate their retirement savings goals and make strategic financial decisions for the upcoming year.
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