New Year, New Contribution Limits – More in 2024
At the beginning of each year, it is important to take a moment and familiarize yourself with the retirement contribution limits. Determine how the annual limits for contributing to retirement accounts relate to your financial goals. Adjusting your savings and investments sooner than later could have an impact on your long-term success.
The most common contribution limits to note are those for IRA’s and employer sponsored retirement plans.
Roth or Traditional IRA Contribution Limits
Roth or Traditional IRA contributions have increased to $7,000 this year with a $1,000 catch-up for those age 50+. It is also important to note that the income threshold phaseouts for contributing to a Roth have also increased to $146,000 to $161,000 for single filers and $230,000 to $240,000 for married filing joint filers. If you were ineligible last year, it may not be the case this year. Be sure to take another look.
Also, a common mistake made by married couples is not contributing to a non-working spouse’s Roth IRA. The couple can fund the non-working spouse’s Roth IRA as long as one spouse has eligible earned income. Same contribution limits apply $7,000 with a $1,000 catch-up for those age 50+.
Employer Sponsored Retirement Plan Contribution Limits
Another important contribution limit to be aware of is how much can be deferred to an employer sponsored retirement plan such as a 401(k) or 403(b). The elective deferral limit has been raised to $23,000 with a $7,500 catch-up for those age 50+.For those who are deferring pre-tax, you may be able to decrease your tax bill in 2024 further.
For a detailed article, read Kiplinger’s 2024 IRA And 401(k) Contribution Limits | Kiplinger
Next Steps
Take a moment and review your deferrals or after-tax contributions for adjustments. If possible, increase your deferrals or contributions to the maximum allowed in 2024. Contact your plan administrator to learn how to increase your payroll deductions or contact your custodian to increase your monthly contribution amounts. Everyone’s financial situation is unique so understanding how to optimize the limits and apply to you may require the guidance of a financial advisor.
Another great next step to take at the start of each year is reassessing your financial habits. Here is our Personal Finance Best Practices checklist for your quick reference.
The advisors at Wealth Planning Corporation have been planning, coaching, and advising clients for successful retirements since 1984. Learn more about our team and our services at www.wealthp.com.
