Employees will be able to save more money as the 2024 401(K) contribution limits have increased.
According to a statement issued by the IRS, starting in 2024, employees can contribute up to $23,000 into their 401(k), 403(b), most 457 plans or the Thrift Savings Plan for federal employees. That is an increase of $500 jump from the 2023 limits. In addition, the limit on total employer-plus-employee contributions to defined contribution plans will increase to $69,000 in 2024, up from $66,000 in 2023.
The bad news, however, is that the catch-up contribution limit for employees ages 50 and older who participate will remain at $7,500, the same amount in 2023.
The 401(k) contribution increase for 2024 is significant for employees who need to increase their tax-deferred savings to achieve their retirement goals.
According to recent studies, inflation in 2023 has eroded confidence in having enough savings for retirement. Some studies are showing a 10% to 15% increase in individuals less confident. Although inflation has eased over the past year, a large percentage of workers see inflation as an obstacle to saving for a comfortable retirement.
In addition to these 401(K) changes, the IRS also announced defined benefit plan limits for 2024.
Effective Jan. 1, the maximum annual benefit that may be provided through a defined benefit plan is $275,000, up from $265,000. For a participant who “separated from service” before Jan. 1, the limitation under a defined benefit plan under section 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2023, by 1.0351, the IRS said.
The IRS also raised the limit on annual contributions to an IRA to $7,000, up from $6,500 in 2023.The IRA catch‑up contribution limit for individuals ages 50 and over is not subject to an annual cost‑of‑living adjustment and remains $1,000, the IRS said.
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