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.