IRS increases 401(k) limit to $23K in 2024, IRA limit raised to $7K.

Contribution Limits for Retirement Plans Increased for 2024

The Internal Revenue Service (IRS)‌ has recently announced an exciting update for retirement plan contributors. The ‍contribution ⁤limits for popular retirement⁤ plans like 401(k) and Individual Retirement Account (IRA) have ⁤been raised by $500 for the upcoming ‍year.

“The ​contribution limit for employees who participate in 401(k), 403(b), and most 457 plans, as well⁤ as the federal government’s‍ Thrift Savings Plan, is increased to $23,000, up from $22,500,” the IRS said on Nov. 1. “The limit on annual contributions to an IRA ​increased to $7,000, up from⁢ $6,500.”

This ⁣boost in contribution limits provides ⁤an excellent opportunity⁢ for individuals to enhance their tax-free savings. ​Additionally, those aged‌ 50 and above can take advantage of catch-up contributions, allowing them to make additional contributions to their retirement accounts.

For 401(k)⁣ accounts, contributions are deducted directly from an employee’s salary⁣ before taxes, enabling ​individuals to build a larger pre-tax retirement‌ fund. The $500 increase ⁣in contribution not only helps grow the account tax-free but also‍ results in a ⁢lower taxable income.

Similarly, ​IRA accounts offer the benefit of deducting contributions from the income tax return, as explained by the IRS:

“Taxpayers⁤ can deduct contributions to a traditional IRA ‌if they meet certain conditions. If during ⁢the year, either the taxpayer or⁤ the‌ taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or‌ phased out, until​ it is eliminated, depending on ⁢filing status and income,” said the ‍IRS.

New Phase-Out Ranges for IRA Accounts

The IRS has also announced new phase-out‍ ranges for IRA accounts in the upcoming year:

• For single taxpayers‍ covered by a ⁢workplace retirement plan, the phase-out range has been raised ⁣to $77,000-$87,000, up from $73,000-$83,000—an increase ‍of $4,000.
• For married couples filing jointly, if the spouse making the IRA contribution is ⁣covered⁣ by a ⁣workplace retirement plan, the phase-out ⁣range next year will be $123,000-$143,000, up from between $116,000 and $136,000—an increase of $7,000.
• For‌ an IRA contributor‌ who is not covered by a‌ workplace retirement plan and is married‌ to someone who is covered, the phase-out range is set to ‍be ‍between $230,000 and $240,000, up from a range of $218,000 and $228,000—an increase of $12,000.
• For a married⁢ individual filing a separate return who⁣ is covered by a workplace retirement plan, the phase-out range will remain ‍unchanged between $0 and $10,000.

These phase-out ranges help manage the extent to which individuals can benefit from tax ⁤advantages such as deductions, exemptions, and credits.

Aside from 401(k) and IRA accounts, the⁣ IRS ⁢has also ‍made​ changes⁤ to other retirement accounts. The ⁣contribution⁣ limit for⁤ Savings Incentive‍ Match Plan for Employees of Small Employers (SIMPLE) accounts has been⁤ raised ​to $16,000 for 2024, with a catch-up‍ contribution⁢ of $3,500.

Furthermore, the income limits for‍ the Saver’s Credit, also ⁣known as the Retirement Savings Contributions Credit, have been adjusted:

• The limit for low and moderate-income married⁤ couples filing jointly has been raised from $73,000‍ to $76,500.
• For heads of ‍households, the limit for 2024 will be $57,375, up from $54,750.
• The limit for ⁤singles and married individuals who file separately has been⁣ raised to $38,250 from $36,500.

Hardship Withdrawals and the‌ Importance of Continued⁤ Investment

These increased contribution limits come at a time when more Americans are⁣ facing financial ‌hardships and withdrawing money from their ​retirement accounts. According to Bank ⁤of‍ America (BofA), the number of individuals making hardship withdrawals from their‍ 401(k) accounts has ⁢risen significantly.

In the second quarter of this year, 15,950 individuals made a hardship‍ withdrawal from their ‍401(k) account, marking a 12% increase from Q1 and a 36% increase from‌ Q3, 2022.

While short-term ⁢expenses may take priority, it is‍ crucial for individuals to continue investing in their long-term retirement savings. The $500 increase in contribution limits provides an opportunity to ⁣build a more secure financial future.

Let’s make the most of these increased contribution limits and ensure a comfortable ⁢retirement for ourselves!

How do⁣ the new phase-out ranges for workplace retirement plans‌ provide more flexibility for individuals regarding their eligibility to deduct contributions to ‍their IRA accounts?

By a workplace retirement plan, the‌ phase-out ‌range remains⁤ $0-$10,000.

These new phase-out ranges ‍provide individuals with more flexibility ​in determining their eligibility to deduct contributions to their IRA accounts. It is important ⁣to note that non-deductible contributions can still be made to an IRA account⁢ regardless ​of​ income‍ level.

Overall, the increased contribution limits for retirement plans in 2024 present an​ opportunity for individuals to save more for their future and take advantage of potential tax benefits.

As retirement⁣ planning becomes increasingly vital, it is essential for individuals‍ to educate themselves about the various⁣ retirement plan options ​available ⁢to them. Consulting with a financial advisor or tax professional can⁣ help individuals make⁢ informed decisions and maximize the benefits of​ these increased contribution limits.

By taking advantage ⁤of the new limits​ and exploring different retirement plan ‍options, individuals can work towards​ a more secure and comfortable future.

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