When working on a comprehensive financial plan, it’s always a good time to check in and make sure you’ve buttoned up your retirement contributions to maximize your savings opportunities.
The IRS recently updated the limits for this year and next, which could positively impact your ability to save for the future, so you can keep those traditions going for many years to come. With that in mind, we’ve gathered some of the updated contribution limits for common accounts, including Traditional IRAs, Roth IRAs, SEPs, SIMPLE IRAs, and employer-sponsored accounts like 401(k)s, 457s, 403(b)s, and the TSP.
Traditional Individual Retirement Accounts (IRA) and Roth IRAs
These accounts remain good options for people looking to grow their retirement savings while enjoying potential tax advantages. For 2023, the annual contribution limit for both Traditional and Roth IRAs was raised to $6,500 for individuals under 50 years old. For those aged 50 and older, the catch-up contribution limit remains at an additional $1,000, allowing a maximum contribution of $7,500. In 2024, these limits will be increased again to allow $7,000 for those under age 50 and for those age 50 and over, a catch-up contribution of $1,000 makes their total IRA limit add up to $8,000.
Traditional and Roth IRAs | 2024 | 2023 | 2022 |
Under Age 50 Limit | $7,000 | $6,500 | $6,000 |
Catch-Up Amount | $1,000 | $1,000 | $1,000 |
Age 50 and Over Limit | $8,000 | $7,500 | $7,000 |
Source: IRS website - IRAs
There are different strategies for tax efficiency when considering Traditional IRAs versus Roth IRAs, so be sure to ask us how these accounts can work within your financial plan. It’s easy to overlook the importance of the tax location of our assets in the accumulation phase and try to maximize deductions as much as possible. This strategy can sometimes lack the foresight of tax efficiency, which may mean paying more in taxes upfront, but saves on taxes paid over your lifetime.
Created in the 1990s, the Roth IRA is regarded as one of the most powerful tools available to Americans in planning for tax efficiency. It is one of the main account types where, because your contributions are made with after-tax dollars, you won’t have to pay the IRS again down the line when taking of-age distributions.
Not everyone can take advantage of these accounts, so if you’re outside those limits, we can delve into some of the other strategies available to you. If you’d like help determining which account types are best for your financial goals, let’s connect!
Don’t forget to scroll to the bottom for the IRS income limits on the deductibility of Traditional IRA contributions or the ability to make Roth contributions!
SIMPLE IRAs
SIMPLE IRAs have also received an increased limit for this year and next, with the 2023 limit being raised to $15,500 and the 2024 limit rising again to $16,000. The catch-up contributions have also seen an increase, with individuals over age 50 being allowed a catch-up amount of $3,500 starting in 2023. These accounts are unique in that employers are required to contribute to them on behalf of their employees in the form of a match or an across-the-board flat percentage.
SIMPLE IRAs | 2024 | 2023 | 2022 |
Under Age 50 Limit | $16,000 | $15,500 | $14,000 |
Catch-Up Amount | $3,500 | $3,500 | $3,000 |
Age 50 and Over Limit | $19,500 | $19,000 | $17,000 |
Source: IRS website - SIMPLEs
Simplified Employee Pension (SEP) IRA
SEP IRAs, commonly used by self-employed individuals and small business owners, are subject to their own rules and work a little differently. Employers are allowed to contribute up to the lesser of 25% of compensation, or $66,000 for 2023 and $69,000 for 2024. Accounts with higher limits like these can be particularly beneficial for those with variable incomes or seeking to contribute more substantially toward retirement.
SEP IRAs | 2024 | 2023 | 2022 |
Under Age 50 Limit | Lesser of $69,000 or 25% | Lesser of $66,000 or 25% | Lesser of $61,000 or 25% |
Catch-Up Amount | None | None | None |
Age 50 and Over Limit | Lesser of $69,000 or 25% | Lesser of $66,000 or 25% | Lesser of $61,000 or 25% |
Source: IRS website - SEPs
Reminder! Only employers can add to these accounts. The employee cannot add to their own account as a salary deferral. Also, note that there are no catch-up contributions for SEP IRAs. The limit is the same, regardless of the age of the employee.
If you’re looking at starting a retirement plan for your solo-preneur business, you may want to compare the benefits of a Solo 401(k) versus a SEP IRA. There are nuances to how these accounts work, so it may be best to enlist the help of a financial professional to discuss what’s best for your specific situation. Reach out to us if you’d like some guidance!
401(k), 457, 403(b), and TSP Plans
Employer-sponsored retirement plans are popular retirement savings vehicles. However, many people forget they can contribute more than an employer matches into these accounts! If you have the capacity to contribute more but don’t know if you can, check with your employer — they can help steer you in the right direction to avoid missing out on any potential additional contributions.
The annual contribution limit for 2023 has been raised for these plans to $22,500, with this amount going up to $30,000 for 2024. Additionally, the catch-up contribution limit for individuals aged 50 and over is $7,500, allowing a total contribution of $30,000 for 2023 and $30,500 for 2024. It's important to take advantage of employer matches and consider maximizing contributions to benefit from potential tax advantages and employer contributions.
Note that contributions to your 401(k) plan could impact the tax deductibility of any IRA contributions. Again, see the MAGI Limits section at the bottom of this article and talk with your tax professional for more details regarding the nuances there.
401(k), 457, 403(b), and TSP Plans | 2024 | 2023 | 2022 |
Under Age 50 Limit | $23,000 | $22,500 | $20,500 |
Catch-Up Amount | $7,500 | $7,500 | $6,500 |
Age 50 and Over Limit | $30,500 | $30,000 | $27,000 |
Other Relevant Accounts
Beyond these primary retirement accounts, there may be other avenues for savings, income planning, and investment, such as Health Savings Accounts (HSAs), self-funded pension plans, insurance-based solutions, other employer-based plans, etc.
If you have questions regarding your specific financial situation, we’re happy to have a conversation. We can also work in tandem with CPAs to tailor recommendations to our clients’ unique needs.
Income Limitations for Account Deductibility
While we’re on the topic of tax nuances, there are also income limitations to the deductibility of IRA contributions. To brace against any surprises as we enter tax season, compare your estimated Modified Adjusted Gross Income (MAGI) to the chart below to see how your income and access to employer-sponsored plans affect your ability to deduct your Traditional IRA contributions. If your MAGI is below the income limits, then you should be able to benefit from a full deduction of your contributions.
MAGI Limits - Traditional IRAs | 2024 | 2023 | 2022 |
Single or Head of Household | $77,000- $87,000 | $73,000- $83,000 | $68,000- $78,000 |
Married filing jointly; a spouse who participates in an employer-sponsored plan | $123,000- $143,000 | $116,000- $136,000 | $109,000- $129,000 |
Married filing jointly; a spouse who does not participate in an employer-sponsored plan | $230,000- $240,000 | $218,000- $228,000 | $204,000- $214,000 |
Income Limits for Roth IRA Contributions
The IRS also has income limits for making Roth IRA Contributions. Below the range, you may take advantage of the full contribution limit. If your MAGI is within the listed range, you may make a partial contribution, but if your MAGI exceeds the limits at the top of the range, then you are not allowed to contribute to a Roth IRA. These limits are specifically for stand-alone Roth IRAs and are not applicable for Roth contributions within 401(k) plans.
MAGI Limits - Roth IRA | 2024 | 2023 | 2022 |
Single or Head of Household | $146,000- $161,000 | $138,000- $153,000 | $129,000- $144,000 |
Married filing jointly | $230,000- $240,000 | $218,000- $228,000 | $204,000- $214,000 |
Source: IRS Website - Roth MAGI Limits
If you cannot contribute to a Roth due to these income limits and you would still like to achieve tax-free growth of your assets, there are strategies we can talk about to work toward that goal. If you would like to fast-track diversifying the taxability of your portfolio, Roth conversions could also be a topic to investigate. As always, if you’ve been thinking about these strategies and aren’t sure if they could be useful to you, just ask! Everyone’s situation is different, and having a professional take a look could help you decipher the details.
The Bottom Line on Retirement Contribution Limits
Do all these charts seem to just add to the confusion? Maybe you’re feeling like you can understand the guidelines, but not how you should be implementing the various accounts into your own savings strategy. That’s a common question we hear from many of our clients. It would be easy to plan if life was static, but the seasons of life bring new people, stressors, and goals — your financial strategy should adjust to those developments.
If you’d like some help sorting through what these charts mean for your effective retirement savings strategy, reach out to us. We’d love to help you sort through what options are available to you and how you can plan to maximize your retirement savings strategy.