By Richard Rubin Nov. 2, 2023 The Wall Street Journal
WASHINGTON—Most workers will be able to put up to $23,000 into their 401(k)s and similar workplace retirement plans in 2024, up $500 from this year, the IRS said Wednesday.
The tax agency announced the inflation-adjusted limits for retirement plans, following formulas set out in the law.
The limit on contributions to an individual retirement account will also increase by $500, climbing to $7,000 in 2024. People ages 50 and up can make additional so-called catch-up contributions to IRAs and 401(k)-style plans, though those limits remain $1,000 and $7,500, respectively.
The contribution limits are the same for Roth and pretax 401(k) and for individual retirement accounts.
The higher cap for 401(k) contributions will mostly benefit the small slice of workers who set aside the legal maximum. In 2022, 15% of people enrolled in 401(k) accounts administered by Vanguard Group saved the maximum amount.
Some older Americans will also be able to get larger tax benefits from a charitable-giving strategy.
For the first time, the IRS made an inflation adjustment under a law enacted last year that will increase the benefits of a popular tax-planning technique. Starting in 2024, IRA holders will be able to send $105,000 to a charity and have it count toward their minimum required distributions from those retirement accounts. That is up from the $100,000 limit that had been unchanged for many years.
Many tax provisions outside of the retirement system are also tied to inflation, including the standard deduction, income breakpoints for tax brackets and exclusions for estate and gift taxes. The IRS hasn’t yet announced those 2024 changes.
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Posted: to Wealth Management News on Thu, Nov 16, 2023
Updated: Thu, Nov 16, 2023