The IRS says that the amount you can sock away for retirement is going up. In 2024, individuals can contribute up to $23,000 to their 401(k) plans in 2024—up from $22,500 for 2023. And those playing catch-up get a boost, too: the catch-up contribution limit for employees aged 50 and over is an additional $7,500 for 2024. The announcement was tied to cost‑of‑living adjustments for pension plans and other retirement-related items for tax year 2024. Here’s a look at some of the most common:The $23,000 limit applies to employee contributions made to 401(k) plans, or similar plans maintained by non-profit and government employers—403(b) plans, most 457 plans and the federal government’s Thrift Savings Plan for workers. If you’re over 50, you can use a catch-up contribution in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan, to contribute up to $30,500 in 2024. Typically, these are pre-tax contributions made to retirement plans by workers. You’re likely already familiar with how it works at the onset—you tick a box on a benefits form that allows you to set aside part of your earnings for retirement. From a tax standpoint, the benefit is two-fold: earnings don't count towards your current year income (which reduces your potential tax bill) and it grows tax-deferred. When you reach retirement age, withdrawals are taxable as you take the money out (with certain exceptions for money transferred directly to charity). The limit on annual contributions to an IRA increased to $7,000 in 2024, up from $6,500 in 2023—that limit applies to the total amount contributed to your traditional and Roth IRAs. IRA plans also allow catch‑up contributions for individuals aged 50 and over—that remains $1,000 for 2024, for a total of $8,000 for workers age 50 and above. With a traditional IRA, contributions are tax-advantaged. If you meet the criteria—that’s where these limits come into play—contributions will be tax-deductible, resulting in a lower tax bill. As with a 401(k) plan, the earnings inside an IRA grow tax-deferred and are subject to tax when you make withdrawals. In addition to the contributions limits, phase-outs apply. What this means is that if during the year, you or your spouse was covered by a retirement plan at work, your tax deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. Here are the phase‑out ranges for 2024:Importantly, if neither you nor your spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply. When it comes to tax, Roth IRAs are treated much differently than traditional IRAs. Unlike a traditional IRA, contributions to a Roth IRA are not deductible when made. The upside? Qualified withdrawals are typically tax-free, assuming that you meet the criteria, including that you've owned your account for five years and you have reached age 59½ or more (some exceptions apply).


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