Retirement Planning 2024: IRS Releases New Dollar Limitations for Retirement Savings Plan Actions

January 23, 2024

On November 1, 2023, the IRS released Notice 2023-75, indicating the cost-of-living adjustments to the dollar limitations for various retirement-related actions for 2024. This notice also has limits on elective deferrals for plans under Sec. 401(k) and Sec. 403(b), and most plans under Sec. 457.

Cost-of-living adjustments for IRAs (Regular and Roth) – and the Saver’s Credit

Below are the adjusted gross income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the Retirement Savings Contribution Credit (known as the “Saver’s Credit”). Mid and low-income taxpayers are eligible for the Saver’s Credit if they are age 18 or older, not claimed as a dependent on another person’s return, and not a student.

The deductibility of contributions to a traditional IRA depends on if the taxpayer meets certain conditions. If during the year, the taxpayer and/or his or her spouse is covered by an employee retirement plan, the deductibility of the contributions may be reduced, or phased out altogether, depending on the filing status and the adjusted gross income (“AGI”) levels of the taxpayer.

Changes to the phase-out ranges for 2024 are as follows:

For single taxpayers covered by a workplace retirement plan, the AGI phase-out range is $77,000 to $87,000, up from $73,000 to $83,000.
For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the AGI phase-out range is $123,000 to $143,000, up from $116,000 to $136,000.
For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s AGI is between $230,000 and $24,000, up from $218,000 and $228,000.

The following are the AGI phase-out ranges for taxpayers making contributions to a Roth IRA:

$146,000 to $161,000 for singles and head of household, up from $138,000 to $153,000.
$230,000 to $240,000 for married couples filing jointly, up from $218,000 to $228,000.
$0 to $10,000 for married couples filing separately, unchanged from the current year.

The following are the AGI limits for the Saver’s Credit for low- and moderate-income workers:

$38,250 for singles and married individuals filing separately, up from $36,500
$57,375 for head of households, up from $54,750
$76,500 for married couples filing jointly, up from $73,00

Pension plan limit amounts for 2024

The limit on contributions by employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan increases to $23,000 from $22,500. This represents only a $500 increase compared to the $2,000 increase in the prior year.
Annual compensation limit under 401(a)(17), 404(I), 408(k)(3)(C) and 408(k)(6)(D)(ii) The catch-up contribution limit for employees aged 50 and over who participate in these plans remains unchanged at $7,500.
The limitation regarding SIMPLE retirement accounts increases to $16,000 from $15,500. This represents only a $500 increase compared to the $2,000 increase in the prior year.
The limitation on the annual benefit under a defined contribution plan under Sec. 415(b)(1)(A) is increased to $275,000 from $265,000.
The limitation for defined contribution plans under Sec. 415(c)(1)(A) increased to $69,000 from $66,000.

Please contact your Herbein team tax advisor at info@herbein.com if you have questions regarding the new pension plan amounts for 2024, or any other tax planning questions.

Article contributed by Emily Nolt.