Our experts answer readers' investing questions and write unbiased product reviews (here's how we assess investing products). Paid non-client promotion: In some cases, we receive a commission from our partners. Our opinions are always our own.
yongyuan/Getty Images
As the end of 2023 approaches, now is the time to start preparing your 2024 financial plan. On November 1, 2023, the IRS announced the new increased contribution and catch-up contribution limits for retirement savings plans like 401(k)s and IRAs in 2024.
Learn about the new 2024 contribution limits and how to make the most of these changes.
Every year the contribution limits for individual and joint retirement savings plans increase as the cost of living in the US goes up. This allows future retirees to save more in response to the inflating market.
Although we won't see as big of a jump as we did from 2022 to 2023, there's still a decent increase in 2024. Here's how retirement plan contributions limits in 2024 compare to 2023.
Contribution type | 2023 | 2024 |
Traditional 401(k), Roth 401(k), 403(b), Thrift Savings Plan, and most 457 plans, age 49 and younger | $22,500 | $23,000 |
Traditional 401(k), Roth 401(k), 403(b), Thrift Savings Plan, and most 457 plans, age 50 and older | $30,000 | $30,500 |
Traditional and Roth IRA, age 49 and younger | $6,500 | $7,000 |
Traditional and Roth IRA, age 50 and older | $7,500 | $8,000 |
SIMPLE 401(k) and IRA, age 49 and younger | $15,500 | $16,000 |
SIMPLE 401(k) and IRA, age 50 and older | $19,000 | $19,500 |
Catch-up contributions for employees with retirement accounts aged 50 or older remain the same in 2024 as in 2023. So if you're eligible, you can contribute an additional $7,500 to your traditional 401(k), Roth 401(k), 403(b), Thrift Savings Plan, and most 457 plans. That's a total of up to $30,500 for the 2024 tax year.
Catch-up contribution limits are also the same for IRAs and SIMPLE plans in 2024 as in 2023. Eligible investors can contribute an extra $1,000 to their traditional or Roth IRAs, or an extra $3,500 to their SIMPLE 401(k) or SIMPLE IRA.
Contributing to both a 401(k) and IRA is a great way to boost retirement savings and get different tax advantages. It's common to have both a 401(k) and an IRA. However, it's unlikely you'll be able to max out both. And even if you could, a higher income may affect your eligibility for tax-advantaged contributions from both accounts.
A 401(k) is one of the best retirement plans for investing in actively managed mutual funds and earning employer-sponsored match contributions. IRAs, on the other hand, are more flexible retirement savings accounts that tend to have lower management and investment fees.
Generally, it's better to max out your 401(k) as it offers a larger contribution limit compared to an IRA. 401(k) contributions can be automatically deducted from your paycheck for easy, routine deposits. Plus, if you're earning an employer contribution match, you'll want to at least be contributing enough to get the full match benefit. An employer match is essentially free money, so won't want to miss out.
That said, depending on your individual situation, maxing out your IRA might make more sense for you. If you're not earning an employer match, or if you're planning on leaving your current place of employment in the next year, then maxing out your IRA may be the better option.
You can always reach out to a CFP or financial advisor who specializes in retirement savings for expert advice and guidance.
