IRS Contribution Limit Updates 2024
What You Need to Know for 401(k), 403(b), SEP, and SIMPLE IRAs
The IRS has announced some pivotal changes to contribution limits for various retirement plans in 2024. Understanding these updates is crucial for maximizing retirement savings and planning effectively.
Some numbers that affect more than just one type of plan: the total Employer Defined Contribution Limit (Employee + Employer Max) in 2024 increased to $69,000. The Annual Compensation Cap is $345,000 with Highly Compensated Employee's (HCEs) earning $155,000 or more.
Here's a breakdown of the changes affecting 401(k), 403(b), SEP, and SIMPLE IRA Plans:
401(k) Plans:
For 401(k) plans, the elective deferral limit—the amount employees can contribute from their salary before taxes—has been increased to $23,000 for 2024. While in line with historical increases, this is less than 2023's significant increase due to COLA. The catch-up contribution limit for those aged 50 and over remains unchanged at an additional $7,500, allowing older employees to contribute a total of $30,500.
403(b) Plans:
Similar to 401(k) plans, 403(b) plans now allow employees to contribute up to $23,000 in elective deferrals in 2024. This increase aligns with the adjustments in the 401(k) plans. The catch-up contribution limit for individuals aged 50 and over remains steady at $7,500.
SEP IRAs (Simplified Employee Pension):
The IRS has raised the maximum contribution limit for SEP IRAs to the lesser of 25% of an employee's compensation or $69,000 in 2024. This increase provides greater flexibility for self-employed individuals and small business owners to save more for retirement.
SIMPLE IRAs (Savings Incentive Match Plan for Employees):
For SIMPLE IRAs, the contribution limits have been raised to $16,000 for 2024. The catch-up contribution limit for those aged 50 and over remains at $3,500.
Traditional & Roth IRAs
IRAs now allow an annual contribution of $7,000 with an additional catch-up contribution of $1,000. Remember that Roth IRAs have income phase-out limits on participation.
These adjustments present an excellent opportunity for employees and employers alike to maximize retirement savings. Keeping abreast of these changes allows for informed financial planning and optimizing contributions to secure a more financially stable retirement. If you're looking for a Retirement Plan Advisor to help you start or manage your retirement plan, email us today, Christina.Tunison@lpl.com.
This information is not intended as authoritative guidance or tax or legal advice. You should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.
#504708 November 2023