When it comes to saving money, especially for retirement, tax advantages are a top concern. After all, anyone can store their hard-earned savings in a checking account or under a mattress, but that means you’ll have a higher tax liability than you need to, and those taxes can cut a big chunk out of your intended savings. If you’re saving up to buy a house or storing money away for emergencies, then that may be an acceptable tradeoff for quick access to liquidity. But retirement is a long term investment that we all need to plan and prepare for, so retirement savings shouldn’t be treated the same way as typical savings.
You’ll want to maximize your retirement investments to ensure you’ll have enough (even more than enough) to live comfortably after you quit working. That’s where the tax advantages of retirement accounts such as IRAs and 401(k)s come into play. Retirement accounts can help you pay less overall in taxes so you’re able to keep even more of your savings for retirement.
There are specific rules and limits imposed by the IRS on these tax-advantaged accounts, and they are subject to change every year. For 2024, the IRS has increased the contribution limits for 401(k) accounts and IRAs. You can learn more about these contribution limit changes below and what they mean for your own retirement planning.
How Do Retirement Contribution Limits Work?
Because of the tax-advantages of different retirement accounts, the IRS sets specific rules and contribution limits for each type. A contribution limit refers to how much you can contribute in the tax year to that type of account. Your income or age may also factor into how much you are able to contribute depending on the account type.
People over the age of 50 are permitted an additional amount added to the standard contribution limit. This is referred to as a “catch-up contribution” and is intended to allow people closer to retirement to more quickly save money in their retirement account.
Any contributions are for a given tax year, ending December 31st. However, IRA accounts have a contribution deadline of April 15th (tax day) of the following year. This means you can still decide to contribute to your IRA for the 2024 tax year up until April 15th of 2025. For other types of accounts, though, contributions only count toward the calendar year for the time the contribution is made.
For more information on the changes for the 2024 tax year, visit the IRS website.
401(k) Contribution Limit Increase for 2024
Many people are likely familiar with a 401(k) plan even if they aren’t sure on the details of how they work. 401(k) plans are the most common employee-sponsored retirement plan. If you’ve had a job, you’ve likely had an opportunity to contribute to a 401(k) plan. Employers may contribute into the plan as well, known as an “employer match”.
For 2024, the maximum contribution has increased from $22,500 to $23,000.
| 401(k) | 2024 | 2023 | 2022 |
| Contribution Limit | $23,000 | $22,500 | $20,500 |
| Catch-up Contribution | $7,500 (additional) | $7,500 (additional) | $6,500 (additional) |
IRA Contribution Limit Increase for 2024
Traditional and Roth IRAs are common types of tax-advantaged retirement accounts. Like with 401(k) accounts, they also have specific IRS rules and contribution limits. With a Traditional IRA, you can save pre-tax dollars which lowers your taxable income today with the tradeoff of paying taxes on that money with its withdrawn in the future. Because income is typically lower in retirement, deferring this income may mean a lower tax bracket when the bill does come due. With a Roth IRA, the money saved is paid in after taxes, which means it can be withdrawn later without any taxes due.
For 2024, the contribution limits for both Traditional IRAs and Roth IRAs has increased from $6,500 to $7,000.
| Traditional IRA | 2024 | 2023 | 2022 |
| Contribution Limit | $7,000 | $6,500 | $6,000 |
| Catch-up Contribution Limit | $1,000 (additional) | $1,000 (additional) | $1,000 (additional) |
| Roth IRA | 2024 | 2023 | 2022 |
| Contribution Limit | $7,000 | $6,500 | $6,000 |
| Catch-up Contribution Limit | $1,000 (additional) | $1,000 (additional) | $1,000 (additional) |
| Income Limit for Full Contribution (Individual) | $146,000 | $138,000 | $129,000 |
| Income Limit for Full Contribution (Joint) | $230,000 | $218,00 | $208,000 |
SIMPLE IRAs Contribution Limits
A Savings Incentive Match Plan for Employees (SIMPLE) IRA is another employer-sponsored retirement account. A SIMPLE IRA is often used by smaller employers. Contribution limits for a SIMPLE IRA tend to be lower than a 401(k) or similar employer-sponsored plan.
For 2024, the contribution limit has increased from $15,500 to $16,000.
| SIMPLE IRA | 2024 | 2023 | 2022 |
| Contribution Limit | $16,000 | $15,500 | $14,000 |
| Catch-up Contribution Limit | $3,500 (additional) | $3,500 (additional) | $3,000 (additional) |
SEP IRAs
A Simplified Employee Pension (SEP) IRA lets an employer contribute funds to a traditional IRA for their employees. This also serves as a retirement savings plan for self-employed individuals. In a SEP, the employee doesn’t make contributions, and instead, only the employer makes contributions to the retirement account.
| SEP IRA | 2024 | 2023 |
| Contribution limit | $69,000 or 25% of net earnings | $66,000 or 25% of net earnings |
Thrift Savings Plan (TSPs) Contribution Limits
A TSP is afforded to any federal employee and/or member of the armed forces. Resembling a 401(k) plan, a TSP offers a more limited option of investments, with only six funds available for account holders. Additionally, there are no income limits to prevent high-income earners from contributing to a TSP if desired.
The contribution limit for a TSP has increased from $22,500 to $23,000 for 2024.
| TSP | 2024 | 2023 | 2022 |
| Contribution Limit | $23,000 | $22,500 | $20,500 |
Health Savings Plan (HSA) Contribution Limits
A Health Savings Plan (HSA) is a way to save money for healthcare costs with pre-tax dollars. Money in an HSA can only be used for qualifying medical expenses, but they are exempt from federal taxes. HSAs are only available to people with certain high-deductible health plans.
The contribution limit for HSAs has increased for the 2024 tax year from $3,850 to $4,150 for individuals and from $7,750 to $8,300 for families.
| HSA | 2024 | 2023 |
| Contribution Limit (Individual) | $4,150 | $3,850 |
| Contribution Limit (Family) | $8,300 | $7,750 |
| Catch-up Contribution Limit | $1,000 | $1,000 |
403(b) Contribution Limits
Retirement planning for employees of 501(c)3 tax-exempt organizations looks slightly different. Employees of a 501(c)3 tax-exempt organization or public school can utilize a 403(b) retirement plan. Tax advantages of a 403(b) are similar to a 401(k) but may come with added benefits like shorter vesting periods and exemptions from nondiscrimination testing.
The contribution limit for a 403(b) has increased from $22,500 to $23,000 for 2024.
| 403(b) | 2024 | 2023 | 2022 |
| Contribution Limit | $23,000 | $22,500 | $20,500 |
| Catch-up Contribution Limit | $7,500 (additional) | $7,500 (additional) | $6,500 (additional) |
457(b) Contribution Limits
Similar to a 403(b), a 457(b) offers tax-advantaged retirement savings for employees of state and local governments (along with some select nonprofit organizations). Contributions to a 457(b) are pre-tax (like Traditional IRAs), as any earnings taxed at the time of withdrawal.
The contribution limit for a 457(b) has increased from $22,500 to $23,000 for 2024.
| 457(b) | 2024 | 2023 | 2022 |
| Contribution Limit | $23,000 | $22,500 | $20,500 |
| Catch-up Contribution Limit | $7,500 (additional) | $7,500 (additional) | $6,500 (additional) |
Precious Metal IRAs
Using tax-advantaged retirement accounts is the smartest way to save for your future, but many investments can be highly volatile and the U.S. dollar’s value is quickly decreasing. This is why many people choose to invest in a precious metals IRA.
Because you can invest precious metals, such as gold and silver, into an IRA, you’re able to enjoy the same tax benefits as if you were investing cash for these assets. This means for 2024 as contribution limits go up, you can further diversify your savings through a precious metals IRA.
Diversification is always important in any investment strategy, and precious metals are a great way to protect against inflation. Give Birch Gold Group a call to learn more or request our free info kit today.
