Planning for retirement involves making strategic decisions about how to save and invest your money. Contributing to retirement accounts is a key aspect of this planning, but it’s important to be aware of the contribution limits set by the IRS for various types of accounts. In 2024, these limits remain critical factors for those seeking to maximize their retirement savings. Let’s delve into the contribution limits for different retirement accounts.
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Traditional and Roth IRAs:
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- The contribution limit for Traditional and Roth IRAs typically increases in smaller increments. In 2024, individuals under the age of 50 can contribute up to $7,000 for the year.
- For those aged 50 and above, the catch-up contribution limit for IRAs remains at $1,000, allowing them to contribute a total of $8,000 this year.
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SIMPLE IRA:
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- SIMPLE IRAs, designed for small businesses, have lower contribution limits compared to 401(k) plans. For 2024, the maximum contribution limit for employees under 50 is $16,000.
- Employees aged 50 and above have a catch-up contribution allowance of $3,500, allowing them to contribute up to $19,500 annually.
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SEP IRA:
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- SEP IRAs, typically utilized by self-employed individuals and small business owners, have unique contribution rules. As of 2024, the maximum contribution limit is 25% of an employee’s compensation or $69,000, whichever is less.
- It’s crucial to note that contribution limits for SEP IRAs can vary based on income and other factors, making it essential for individuals to consult with a financial advisor or tax professional.
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401(k) and 403(b) Retirement Plans:
Traditional Contributions.
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- For 2024, individuals under the age of 50 can contribute up to $23,000 annually.
- However, for those aged 50 and above, there’s an additional catch-up contribution allowance. In 2024, this limit stands at $7,500, bringing the total allowable contribution to $30,500 for older individuals.
Roth Contributions.
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- Roth 401(k) and 403(b) plans share the same contribution limits as the traditional option meaning your total voluntary contributions to your Traditional or Roth employer plan cannot exceed the contribution limit. As of 2024, individuals under 50 can contribute up to $23,000 annually.
- Those aged 50 and above can make additional catch-up contributions of up to $7,500, resulting in a total contribution limit of $30,500 for older individuals.
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Solo 401(k) Plans:
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- Solo 401(k) plans cater to self-employed individuals and small business owners without employees, offering both employer and employee contribution components. Employer nonelective contribution is up to 25% of compensation.
- In 2024, the contribution limit for solo 401(k) plans mirrors that of traditional 401(k) plans, allowing individuals under 50 to contribute up to $23,000 annually, up to a total of $69,000 with an additional catch-up contribution allowance of $7,500 for those aged 50 and above.
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457 Plans:
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- These deferred compensation plans, commonly offered by non-profit organizations, public schools, and governmental entities, have similar contribution limits to 401(k) and 403(b) plans but the contributions are additive. You can maximize your 457 plan and then also choose to maximize your 401(k) or 403(b) at the same employer.
- In 2024, individuals under 50 can contribute up to $23,000 annually to their 457 plans, with a catch-up contribution allowance of $7,500 for those aged 50 and above. These plans have now added Roth contributions as an option.
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Health Savings Accounts (HSAs):
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- While not exclusively a retirement account, HSAs offer tax advantages and can serve as supplementary retirement savings vehicles. In 2024, individuals with high-deductible health plans can contribute up to $4,150 for self-only coverage and $8,300 for family coverage.
- Those aged 55 and above can make additional catch-up contributions of $1,000.
Understanding retirement account contribution limits is crucial for effective retirement planning in 2024. Here at Alaska Wealth Advisors, we can help navigate these limits to maximize your savings potential while ensuring a secure financial future. By making strategic decisions about contributions, you can take advantage of tax benefits and build a robust retirement nest egg tailored to your goals and circumstances.
Stan Moiseev
Associate Financial Advisor
Alaska Wealth Advisors, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Alaska Wealth Advisors’ investment advisory services can be found in its Form ADV Part 2 and/or Form CRS, both of which are available upon request. Material presented has been derived from sources considered to be reliable, but accuracy and completeness cannot be guaranteed.
Note: This material should not be construed as tax advice. You should always consult with your tax professional with regard to specific tax questions and obligations.
