The Internal Revenue Service published 2024 Cost-of-Living Adjustments (COLA) in Notice 2023-75 on November 1, 2023.
The COLA increases will become effective on January 1, 2024, and impact many aspects and types of retirement plans as well as Individual Retirement Accounts (IRAs).
2024 COLA Retirement Plan Highlights
The elective deferral limits for 401(k), 403(b) and most 457 plans increased to $23,000 for 2024 compared to $22,500 for 2023.
The catch-up contribution limit for 401(k), 403(b) and most 457 plan participants who are age 50 or older remains $7,500 for 2024. Therefore, plan participants who are 50 and older can contribute up to $30,500 starting in 2024.
The annual contribution limit for 401(k) plans and 403(b) plans, which includes both employee deferrals and employer contributions (e.g., match and/or profit-sharing contributions), increased to $69,000 for 2024 compared to $66,000 for 2023.
Note that catch-up contributions are not included in the annual contribution limit of $69,000, so a participant who is age 50 or older could have their 401(k) or 403(b) plan funded with up to $76,500 in 2024, assuming the plan is designed to accomplish as much and otherwise passed IRS required annual nondiscrimination tests.
2024 COLA IRA Highlights
The limit for annual contributions to an IRA increased to $7,000 for 2024 compared to $6,500 in 2023, but the additional catch-up contribution limit for individual aged 50 and older remains unchanged at $1,000.
Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or his or her 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 his or her 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 $77,000 to $87,000, up from $73,000 to $83,000 in 2023.
For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $123,000 to $143,000, up from $116,000 to $133,000 in 2023.
For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $230,000 and $240,000, up from $218,000 and $228,000 in 2023.
For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
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, up from between $138,000 and $153,000. For married couples filing jointly, the income phase-out range is increased to between $230,000 and $240,000, up from between $218,000 and $228,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
The income limit for the Saver's Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $76,500 for married couples filing jointly, up from $73,000; $57,375 for heads of household, up from $54,750; and $38,250 for singles and married individuals filing separately, up from $36,500.
The amount individuals can contribute to their SIMPLE retirement accounts is increased to $16,000, up from $15,500.
Additional changes made under SECURE 2.0 are as follows:
The limitation on premiums paid with respect to a qualifying longevity annuity contract to $200,000. For 2024, this limitation remains $200,000.
Added an adjustment to the deductible limit on charitable distributions. For 2024, this limitation is increased to $105,000, up from $100,000.
Added a deductible limit for a one-time election to treat a distribution from an individual retirement account made directly by the trustee to a split-interest entity. For 2024, this limitation is increased to $53,000, up from $50,000.
Schneider Downs Retirement Solutions has experience in all facets of qualified and non-qualified plan delivery, which allows us to be flexible to the needs and direction of our clients. Our specialized team of advisers and consultants provide objective advice and expertise to help plan sponsors govern their retirement plans appropriately, mitigate risk, improve participant outcomes and support efficient and compliant plan operations.
Schneider Downs Wealth Management Advisors, LP (SDWMA) is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC). SDWMA provides fee-based investment management services and financial planning services, along with fee-based retirement advisory and consulting services. Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice. Registration with the SEC does not imply any level of skill or training.
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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.