Smaller 401(k), IRA Contribution Limit Increases Expected in 2024
What You Need to Know
Each year in mid-October, the IRS publishes its annual inflation adjustments for the next year’s retirement account contribution limits.
Retirement savers enjoyed big increases for 2023, but despite persistent inflation, smaller limit increases are expected for 2024.
With a smaller Social Security COLA also projected for next year, retirement savers are feeling the sting of inflation.
Unless a federal government shutdown derails the normal course of business, the Internal Revenue Service will announce 2024’s 401(k) plan and individual retirement account contribution limits in less than a month’s time.
Despite the persistence of high inflation, tax experts anticipate that 2024’s increase will fall significantly below the sizable limit hike of $2,000 enjoyed by retirement savers for 2023. That increase pushed the 2023 contribution limit to $22,500 for 401(k), 4013(b) and 457 plans, although savers over 50 can use catch-up contributions to sock away up to $30,000 this year.
According to projections from Bloomberg Tax and Milliman, the defined contribution plan deferral increase for 2024 is likely to be in the range of $500, or only about one quarter of the 2023 increase.
A similar boost is projected for contributions going to both traditional and Roth individual retirement accounts. These limits only increased from $6,000 to $6,500 for 2023, and a similar hike is projected for 2024.
Should these projections prove accurate, that would imply a 2024 contribution limit of $23,000 for 401(k), 4013(b) and 457 plans. For IRAs, the 2024 limit would be $7,000, with an additional $1,000 of potential catch-up contributions allowed for those over age 50.
According to the projections, for defined contribution plans, the maximum annual addition counting all potential employer and employee contributions will be between $68,000 and $69,000, and the catch-up contribution limit for 2024 is estimated to remain at $7,500, the same level as in 2023.
Smaller Social Security COLA Also Expected
Another key data point expected to be released in mid-October is the 2024 Social Security cost-of-living adjustment, or COLA.
According to projections by The Senior Citizens League, the 2024 Social Security COLA is likely to be 3.2%, based on the latest consumer price index data released in mid-September.
