By Dr. Jim Dahle, WCI Founder
Contribution limits for 401(k)s, 403(b)s, 457(b)s, IRAs, Roth IRAs, HSAs, FSAs, SIMPLE IRAs, and SEP-IRAs are all indexed to inflation. While the retirement contribution limits do not go up every year and while every account does not use the same formula for when there will be an increase, you will generally see an increased contribution every year or two.
Inflation exploded in 2022, all the way up to 9.1% in July, and as a result, the 2023 contribution limits for many of these accounts were increased in a relatively significant way. But inflation has been tamed—at least somewhat—in 2023, and as a result, the increases in those limits for 2024 aren't quite as extravagant. If you know the latest inflation numbers, it is possible to calculate the increase even before the IRS announces it in October or November (in 2022, the IRS officially released those figures in late October).
Note that the Secure Act 2.0 passed in 2022 will eventually change catch-up contributions in significant ways. The 401(k)/403(b) catch-up for those 50+ has always been indexed to inflation. But originally the law stated that, starting in 2024, if you have a Modified Adjusted Gross Income of $145,000+ (indexed to inflation), those catch-up contributions would now have to come on the Roth side. That means tax-deferred catch-up contributions would no longer be allowed for these high earners.
In August 2023, though, the IRS announced that it was pushing back that provision until 2026. That means for the next few years, your catch-up contributions can come either via the traditional method or via Roth.
Also remember that in 2025, catch-up contributions will be increased even more for those who are 60-63 years old (it'll be the larger of $10,000 or 50% more than the regular catch-up contributions).
For now, people can make their own calculations for what the 2024 retirement plan contributions will be (we've made our best guess at the catch-up contributions). We'll update them if they change when the IRS makes it official in the final few months of 2023.
2024 401(k) and 403(b) Employee Contribution Limit
The total employee contribution limit to all 401(k) and 403(b) plans for those under 50 will be going up from $22,500 in 2023 to $23,000 in 2024 (compare that to the $2,000 it increased from 2022 to 2023). The catch-up contribution limit will remain at $7,500, so if you're 50+, your 401(k) employee contribution limit should be $30,500 in 2024.
2024 401(k)/403(b)/401(a) Total Contribution Limit
The total of all employee and employer contributions per employer will increase from $66,000 in 2023 to $68,000 in 2024 for those under 50. Since the catch-up has stayed at $7,500, the total contribution for those 50+ will be $75,500.
Note that the 401(a) limit is separate from the 403(b) limit. So, you could theoretically get $68,000 into each of them.
2024 457(b) Contribution Limit
457(b) contribution limits will increase from $22,500 to $23,000 in 2024. 457(b)s have unique catch-up contribution rules, so consult with your plan administrator if you are interested in putting more in your 457(b).
2024 Traditional and Roth IRA Contribution Limits
IRA contribution limits and catch-up contributions will increase from $6,500 ($7,500 if you're 50+) in 2023 to $7,000 ($8,000 if you're 50+) in 2024.
2024 SEP-IRA Contribution Limits
SEP-IRA contribution limits will increase to $68,000 per year for 2024, up from $66,000 in 2023.
2024 SIMPLE IRA and SIMPLE 401(k) Contribution Limits
The SIMPLE IRA and SIMPLE 401(k) contribution limits will increase from $15,500 in 2023 to $16,000 in 2024.
2024 Health Savings Account (HSA) Contribution Limits
For single people, the HSA contribution limit will increase from $3,850 in 2023 to $4,150 in 2024. Family coverage will increase from $7,750 to $8,300.
2024 Flexible Savings Account (FSA) Contribution Limits
Healthcare FSA contribution limits will increase from $3,050 in 2023 to $3,200 in 2024. Note that there are other types of FSAs (such as dependent care FSAs) with different limits.
Other Interesting Increases
The 401(a) compensation limit (the amount of earned income that can be used to calculate retirement account contributions) will increase from $330,000 in 2023 to $340,000 in 2024. This is always 5X the maximum 401(k) plan total contribution limit.
The deductibility phaseout for IRA contributions for those with a retirement plan at work should increase from $73,000-$83,000 in 2023 for singles to $77,000-$87,000 in 2024, and it'll move from $116,000-$136,00 in 2023 for those Married Filing Jointly to $123,000-$143,000 in 2024.
The Roth IRA Direct Contribution Limit phaseout will increase from $138,000-$153,000 in 2023 for singles to $146,000-$161,000 in 2024 and from $218,000-$228,000 for 2023 for those Married Filing Jointly to $230,000-$240,000 in 2024. If your MAGI is above that, you'll need to contribute indirectly via the Backdoor Roth IRA process.
While Social Security benefits increased by 8.7% for 2023, it's estimated that the bump for 2024 will be much more modest—probably somewhere around 3%. If you were a top earner for your career and qualified for the top benefit level, you received $4,559 per month in 2023 (meaning that if that 3% increase actually happens, you'd earn about $4,696 per month in 2024).
The definition of a highly compensated employee was $150,000 in 2023, but it's unclear exactly what that will be in 2024.
While it feels like all of these are increases, they are really just keeping up with inflation. They're just cost of living increases. On a real (after-inflation) basis, they're basically the same as this year.
What do you think? Are you surprised by any of these? Are you glad they're indexed to inflation? Comment below!
So you do have a crystal ball and have been hiding it from us 😁
Just projecting. Occasionally we do have to do a correction on a data point or two in this post in a couple of months. But most of the data needed to make the projections is now out there.
It’s a bit strange for me to read this type of article, having dropped to two days a week in the summer of 2022.
I now have no 457 plan, no 401a plan, no HSA, and my old side gig SEP-IRA is the only place currently likely to be funded for 2023. I did max all these out by August of 2022, to the degree I could and received the largest federal tax refund of our adult lives this past April.
I make less than half of my prior income with my two days a week of telehealth and quarterly locums side gig. I also lost my free health insurance, and cheap dental and vision coverage.
It’s a new game. My current plan is to deduct as much of the health insurance premiums I can, and max out the SEP-IRA as I never switched to a solo 401 plan. I was just used to the SEP and couldn’t use the extra contribution space anyway.
Another columnist here wrote that my self employed health insurance deduction “would be prorated” even though my half time W2 employer offers no health insurance…which didn’t seem fair to me.
I think I might be able to get a self employed HSA to max out with a HDHCP, but it’s complicated.
It seems my defense (tax reductions) may be limited to: maxing out the SEP-IRA, deducting the health insurance premiums to the degree I can, and getting a self employed HSA. Maybe I will also qualify for a Roth contribution if our MAGI is less than $218K.
It’s been a rude awakening to pay $13,000 a year for crappy health coverage and dip into my HSA for about $5000 worth of copays and “we don’t pay anything on that” limited coverage. That’s $18,000 for year one and none of us were sick. We are looking for a “cash” dentist as dental insurance costs about the same as the services we need (basic cleanings and occasional filling repairs).
The days of maxing out a 401a with a match, a 457 with a small match, the side gig SEP, and an employer HSA (about $90K a year for all) are gone. They were great while I had them…as was our free health plan and the dental/vision.
I spoke with the Fidelity executive services 401k team yesterday and they insisted the $73,500 (for 50+) is across all employers cumulatively. I said my understanding is that the $30k (pre-tax and Roth) tracks the individual cumulatively across all employers, but the $73.5k limit is per each individual employer. They said they disagreed (per irs rules).
My question is: if an individual caps out 73.5k from employer A, say in July (with 30k pretax/makeup, after-tax, and company match) and leaves company A to start with company B on October 1st…… can the individual make after-tax contributions to company B in order to qualify for the company match from company B, October through December?
If company B allows them to. Most company Bs don’t allow you to use the 401(k) for a year though.
The Fidelity rep you spoke to is wrong as noted in this post:
https://www.whitecoatinvestor.com/multiple-401k-rules/
If you feel like arguing, ask them to cite the IRS rule. They won’t find one, but there’s plenty of confusion out there on this point because it just doesn’t apply to very many people.
Do you all think there is a non-zero chance of a “bail in” in the US in the next 15-20 years?
Wouldn’t you rather have current dollars than future dollars?
Just curious.
Truly I’d rather have past dollars.
Just wanted to understand the age 50 rule. I will turn 50 in May 2024. So am I eligible for the age 50 contribution limits for the various plans throughout all of 2024?
Thanks!
Yes
For those of us that budget our Backdoor Roth contributions in the year prior, how early can we know the next year contribution limits? For example, we’ve already budgeted $6500 for me and my spouse out of this years income to go into the Backdoor Roth in January 2024. But now we will need an extra $500 each? Is there a better way to plan in advance?
The limit has increased $500 about every 4 years going back to 2008 (see chart in article below):
https://www.investopedia.com/ira-contribution-limits-historical-timeline-5221129
The back-to-back increases we have seen in the last two years are due to uncommonly high inflation over that time period.
For the 401(a) plan, can employees contribute any amount that adds up to a total (employee + employer) of $68,000? For example, for a salary of $200,000, a mandatory contribution of 5% and an employer match of 10%, the total baseline contribution would be $30,000. Does that mean the employee could contribute an additional $38,000 into that plan annually for a total of $68,000?
HSA contribution (family) increase from 7,750 to 8,300 is an increase of 550, not 650 as noted in the table. Also there’s a 1,000 catch-up contribution (for those aged 55 or greater) on HSAs (no change from 2023) not noted in the article or table. Thanks for the great article!
Thanks for the corrections/clarifications.
Can you explain the new , for 2024, “additional employer contribution” option for Simple IRA accounts? I would like to see an example. I think the employer can still make the 3% Employer matching contribution PLUS some additional amount from 1% to 10%.
ΔSection 116: Allow Employers to Put More into SIMPLE IRAs
Raises the possible match in a SIMPLE IRA from 2% of compensation (or 3% of compensation if a match) to 10% of compensation or $5,000 indexed to inflation, whichever is less. Starts in 2024.
https://www.whitecoatinvestor.com/secure-act-2-0/
I read it as an ADDITIONAL contribution to the 3% Employer Match. In other words the employer does the 3% employer match just like he did for 2023, but can put in an additional contribution for 1% up to 10% with $5,000 limit on this “additional ” amount. What do you think?
I don’t have any additional secret information on how this will work. My take was that it wasn’t an additional contribution, just a larger one than it used to be but I could be wrong.