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A Look into the 2024 IRS Retirement Savings Thresholds

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The Internal Revenue Service (IRS) plays a central role in ensuring fiscal discipline while at the same time providing a stable economic platform for long-term financial growth. One of the IRS’s areas of emphasis is retirement savings, with regulations adjusted annually to cater to the changing economic landscape. This piece seeks to review the 2024 IRS retirement saving thresholds, giving readers a glimpse into the future as they plan their retirement savings.

The IRS adjusts its retirement savings thresholds, reflecting the changes in the cost of living and inflation rates. The primary reason for these changes is to encourage individuals to save for retirement and to ensure that the retirement savings system remains fair and equitable. Understanding these thresholds helps saving and tax planning; here are the retirement savings thresholds for 2024.

IRAS

First, the contribution limit for Individual Retirement Accounts (IRAs) will experience a moderate increase. The limit on annual contributions to an IRA increases to $7,000, up from $6,500. The IRA catch up contribution limit for individuals aged 50 and over was amended under the SECURE 2.0 Act of 2022 (SECURE 2.0) to include an annual cost of living adjustment. For 2024, the catch-up contribution limit is $1,000, bringing the total for individuals aged 50 and over to $8000.

401(k), 403(b), and 457 plans, Thrift Savings Plans

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, increases to $23,000. Those age 50 and older can contribute up to $30,500, starting in 2024.

SIMPLE Plans

For 2024, the annual contribution limit for SIMPLE IRAs is $16,000. Workers aged 50 or older can make additional catch-up contributions of $3,500 for a total of $19,500. The contribution limits are the same if you’re self-employed.

IRS income thresholds

The IRS also sets income thresholds for tax-deductible contributions to IRAs and Roth IRAs. Upon surpassing these thresholds, contributions to these plans either become partially or not deductible. 

IRAs: Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. Suppose a retirement plan at work covered the taxpayer or the taxpayer’s spouse during the year. In that case, the deduction may be reduced or phased out until it is eliminated, depending on filing status and income. (If a retirement plan at work covers neither the taxpayer nor the spouse, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2024:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $77,000 and $87,000, up from between $73,000 and $83,000.
  • For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $123,000 and $143,000, up from between $116,000 and $136,000.
  • 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 increased to between $230,000 and $240,000, up from between $218,000 and $228,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

Roth IRAs: The income phase-out range for taxpayers making contributions to a Roth IRA is increased to between $146,000 and $161,000 for singles and heads of household.

For married couples filing jointly, the income phase-out range is increased to between $230,000 and $240,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

Saver’s Credit: Finally, for the Saver’s Credit, an incentive for low to moderate income earners to save for retirement, the threshold varies depending on an individual’s filing status. The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $76,500 for married couples filing jointly, $57,375 for heads of household, and $38,250 for singles and married individuals filing separately, up from $36,500.

In conclusion, the IRS contribution limits offers crucial insights into retirement savings planning. It’s vital to be aware of news from the IRS to keep abreast of these changes and adjust retirement savings contributions, plans, and strategies accordingly. It’s also recommended to consult with a financial professional or a tax professional to ensure managing contributions is based on the revised 2024 retirement savings thresholds.

© 2024 Trajan® Wealth LLC. Nothing in this blog is intended as investment advice, nor is it an offer to buy or sell any security. Please consult your financial advisor for questions about your personal financial situation. All investments involve risk, including the potential for loss. Trajan Wealth clients and employees may have a position in any of the securities mentioned. Portfolio holdings and other data are subject to change at any time and without notice. Additionally, the above links provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. These materials are for informational and educational purposes and are not designed, nor intended, to apply to any person’s individual circumstances. It does not take into account the specific investment objectives, tax and financial condition, or particular needs of any specific person. Please consult with your legal and/or tax advisor before making any tax-related decisions.

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