2024 Retirement Limits
Happy New Year from the Wise Investor Group!
We at the Wise Investor Group hope you had an enjoyable holiday season. As we begin 2024, we’d like to update you on a few changes to contribution limits and exclusion amounts that might affect your savings plans. First, those who participate in a work qualified retirement plan like a 401k, 403b, 457 or the government’s Thrift Savings Plan (TSP) may now defer from their salary an additional $500 for a total of $23,000. The catch-up contribution limit for those 50 or older will remain the same at $7,500. Anyone who turns 50 at any time during the year is qualified to make the catch-up contribution. Make sure to update your contributions through your plan administrator.
Next, the annual IRA contribution limit has also increased for 2024 and is now $7,000. The 50 and over catch-up limit remains $1,000. The IRA contribution limit applies to both Traditional and Roth IRA’s.
The income ranges for determining eligibility to make deductible contributions to traditional IRS and to contribute to Roth IRAs also increased for 2024. Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer's spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase‑out ranges for 2024:
- For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $77,000 and $87,000.
- For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $123,000 and $143,000.
- For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to between $230,000 and $240,000.
The income phase-out range for taxpayers making contributions to a Roth IRA is increased to between $146,000 and $161,000 for singles and heads of household. For married couples filing jointly, the income phase-out range is increased to between $230,000 and $240,000.
If you are unable to deduct your traditional IRA contribution, you may still make a “non-deductible contribution”. Just remember to document the non-deductible contribution by filing an IRS Form 8606 with your taxes.
A reminder that most qualified retirement plans now include Roth options that don’t have any adjusted gross income limitations. Deferring some of your 401k contribution into a Roth account might make sense. Each person’s tax situation is different of course, so you’ll want to consider your own tax situation.
While work retirement plan accounts must be funded during the calendar year, IRA contributions for 2023 may be made up until the tax filing date of April 15, 2024.
The estate tax exclusion amount has also increased this year. For 2024 it’s $13,610,000 per person, $27,220,000 for a married couple. Do remember that the Tax Cuts and Jobs Act is due to expire at the end of 2025. With that expiration, the estate tax exclusion will drop back to somewhere in the $5 to 7 million range depending on inflation.
The gift tax exclusion – the amount you can give to anyone without having to report it to the IRS– is increased $1,000 to $18K in 2024. There is always confusion around the gift tax exclusion. Giving more than $18k to anyone does not make the gift “taxable”. It simply reduces your lifetime estate/gift tax exclusion of $13,610,000. The receiver of the gift does not have to report the gift as income.
Lastly, Health Savings Account (HSA) contribution limits have increased for 2024. Individuals can contribute up to $4,150 and families can contribute up to $8,300. Catch-up contributions for individuals aged 55 and older stay the same at $1,000. HSAs are a must for those covered by a high deductible health plan. They are triple tax advantaged…tax deduction up front, earnings grow tax-deferred and distributions are tax-free if used for qualified health care expenses.
As always, if you have any questions regarding contribution limits or other retirement strategies, please reach out to your Wise Investor Group Financial Planner or send us a message via our website at https://www.raymondjames.com/thewiseinvestorgroup/contact-us
Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.
