IRS Raises Retirement Contribution Limits

Americans will be able to save more money for retirement in tax-advantaged accounts in 2024 thanks to an inflation adjustment from the IRS.

The 2024 401(k) contribution limit is $500 higher than this year’s $22,500 max, which reflected a major increase from the 2022 limit of $20,500. The new $23,000 limit will also apply to several other retirement plans, including 403(b)s, most 457 plans and the federal government’s Thrift Savings Plan.

Each year, the IRS looks at changes in the cost-of-living and adjusts the contribution limits accordingly based on a formula. The consumer price index showed inflation was 3.7% for the 12-month period ending in September, which is the basis of the adjustment.

In addition to the new 401(k) contribution limit, the IRS also announced new maximums for contributions to traditional individual retirement accounts, or IRAs. These accounts are not employer-sponsored and their limits are lower, but they are tax-deferred like 401(k)s.

Individuals can contribute up to $7,000 to these accounts in 2024, up from $6,500.

The 2024 contribution limit will be the same ($7,000) for Roth IRAs, which you fund with after-tax dollars but have the benefit of withdrawals in retirement being tax-free. There are also new income caps for making contributions to Roth IRAs. The 2024 limit will be $161,000 for single taxpayers — an increase from $153,000 in 2023 — but note that Roth IRA tax benefits get phased out at lower income levels.

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