IRAs and employer-sponsored retirement plans are subject to annual contribution limits set by the federal government. The limits are adjusted periodically to compensate for inflation and increases in the cost of living.
For tax year 2024, you can contribute up to $7,000 to all IRAs combined (the limit is adjusted annually for inflation) which is an increase of $500 from 2023. If you have a traditional IRA as well as a Roth IRA, you can only contribute a total of the annual limit in one year, not the annual limit to each. If you are age 50 or older, you can also make a $1,000 annual “catch-up” contribution.
Employer-sponsored retirement plans such as 401(k)s and 403(b)s have a $23,000 contribution limit in 2024 (up from $22,500 in 2023); individuals aged 50 and older can contribute an extra $7,500 each year as a catch-up contribution (unchanged from 2023). (Section 403(b) and 457(b) plans may also provide special catch-up opportunities.)
You can contribute up to $16,000 to a SIMPLE IRA or SIMPLE 401(k) plan in 2024 (up from $15,500 in 2023), and an extra $3,500 catch-up contribution if you are age 50 or older (unchanged from 2023).
Distributions from traditional IRAs and most employer-sponsored retirement plans are taxed as ordinary income, except for any after-tax contributions you've made, and the taxable portion may be subject to 10% federal tax penalty if taken prior to reaching age 59½ (unless an exception applies). If you participate in both a traditional IRA and an employer-sponsored plan, your IRA contributions may or may not be tax deductible, depending on your adjusted gross income.
The information in this newsletter is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek guidance from an independent tax or legal professional. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2024 Broadridge Financial Solutions, Inc.