As we approach a new year, it's important to stay informed about any changes to retirement plan contribution limits. In 2024, both individual retirement accounts (IRAs) and 401(k) plans will see adjustments in their contribution limits. These changes can have a significant impact on your retirement savings strategy, so let's delve into what you need to know for the upcoming year.
IRA Contribution Limits
For traditional and Roth IRAs, the annual contribution limits for 2024 have been increased compared to the previous year. If you're under the age of 50, you can contribute up to $7,000, up from the 2023 limit of $6,500. However, if you're 50 or older, you can take advantage of the "catch-up" contribution option, allowing you to contribute an additional $1,000 for a total limit of $8,000.
These increased limits provide an excellent opportunity to boost your retirement savings. Traditional IRAs offer tax-deferred growth, while Roth IRAs allow for tax-free withdrawals in retirement. You can choose the account that best fits your financial goals and take full advantage of the higher contribution limits.
401(k) Contribution Limits
401(k) plans are popular choices for employer-sponsored retirement savings, and the 2024 contribution limits are also getting a boost. For 2024, the annual contribution limit for 401(k) plans is $23,000 for individuals under the age of 50. If you're 50 or older, the catch-up contribution limit remains at $7,500, allowing a total contribution of $30,500.
These limits also apply to 403(b) plans, most 457 plans, and Thrift Savings Plans.
Maxing out your 401(k) contributions can be a powerful way to accelerate your retirement savings. These contributions are typically made with pre-tax dollars, lowering your current taxable income and allowing your investments to grow tax-deferred. If your employer offers a matching contribution, it's essential to contribute enough to receive the full match, as this is essentially free money that can significantly impact your future nest egg.
It's worth noting that contribution limits are subject to change based on inflation and other economic factors, so staying informed about these adjustments is crucial for your retirement planning. As you prepare for the future, consider consulting with a financial advisor to ensure you're making the most of these new contribution limits and building a strong financial foundation for your retirement years.
By taking advantage of these higher limits and making informed investment choices, you can set yourself on a path toward a secure and comfortable retirement. Call our office to schedule an appointment, and we can help you decide how to proceed in light of the new retirement plan contribution limits.