You Can Save More for Retirement in 2024

As an investor, one way you can enhance your long-term retirement security is to fully leverage the potential of tax-advantaged retirement savings vehicles. Each year, the IRS releases new guidelines on the amount of money you can contribute to these accounts. New contribution limits in 2024 allow you to save even more this year through plans such as 401(k)s, 403(b)s and IRAs.

Changes to workplace savings limits
Contribution limits for workplace retirement accounts have been raised by $500 for the year 2024. In 2024, the IRS allows pre-tax employee contributions to 401(k) or 403(b) plans of:

• $23,000 for those under age 50
• $30,500 for those age 50 and older (includes a $7,500 “catch up” contribution).

When combined with employer contributions, a maximum of $69,000 can be directed to your workplace retirement plans in 2024 (plus the $7,500 catch-up contribution for those age 50 and older). Note that total contributions can’t exceed your annual compensation at the company that houses your plan.

If offered by your employer, you may be able to make after-tax contributions to a Roth 401(k). Note that any after-tax contributions are counted toward the $69,000 total maximum limit for employee and employer contributions to workplace plans. Save an amount that makes sense for you, but it can be beneficial to take full advantage of any matching contribution offered by your employer. For example, if an employer offers to match up to 5% of your income into a 401(k) if you make a similar contribution, it, in effect, means you’re doubling your contribution for your retirement savings, before investment earnings are taken into account. This is a great way for your savings to make a big impact.

New IRA contribution limits
IRA contribution limits move up periodically to reflect cost-of-living changes. 2024 is one of those years. The new limits are:

• $7,000 for those under age 50
• $8,000 for those age 50 and older.

Note that contributions can’t exceed 100% of your earned income if you earn less than the limits stated above. Also, these limits apply to total IRA contributions for the year. This is applicable even if you hold multiple IRAs or make contributions to both Roth IRAs (which feature the potential for tax-free earnings growth) and traditional IRAs.

To make fully tax-deductible (pre-tax) traditional IRA contributions in 2024, your modified adjusted gross income cannot exceed:

• $77,000 for single or head-of-household tax filers
• $123,000 for married couples filing a joint return.

Not everyone can make maximum Roth IRA contributions. In 2024, full Roth IRA contributions can only occur if your modified adjusted gross income is less than:

• $146,000 for single or head-of-household tax filers
• $230,000 for married couples filing a joint return.

Save diligently, plan wisely
Determining how much to set aside for retirement and in what types of savings vehicles is best determined through careful planning. The start of a new year is a great time to consider if you want to change or start contributions to these types of accounts. Discuss your retirement strategy with your financial advisor and consult with a tax professional on all tax-related matters.