Employees will be able to contribute up to $23,000 starting in the new year.
11/06/2023 3:20 P.M.
2 minute read
The Internal Revenue Service recently announced it has increased the contribution limits for 401(k) accounts in 2024, according to an article from SHRM.
Starting in 2024, employees can contribute up to $23,000 into their 401(k), 403(b), most 457 plans, or the Thrift Savings Plan for federal employees. This is a $500 increase from the 2023 limits. While this boost is slightly less than the $2,000 jump seen in 2023, it remains a significant change that can help many individuals inch closer to their retirement goals.
The catch-up contribution limit for employees aged 50 and older will remain at $7,500, the same as in 2023. This provision ensures that older workers can continue to make additional contributions to bolster their retirement savings.
One key aspect of the IRS announcement is the limit on total employer-plus-employee contributions to defined contribution plans, which will increase to $69,000 in 2024, up from $66,000 in 2023. This adjustment acknowledges the need for a more robust retirement savings strategy to counteract the effects of inflation and a shifting economic landscape.
Recent data from the Employee Benefit Research Institute (EBRI) and Greenwald Research underscores the urgency of these changes. Workers’ and retirees’ confidence in having enough money to live comfortably throughout retirement dropped significantly from 2022’s levels, with just 64% of workers and 73% of retirees expressing confidence. This decline, the most substantial since 2008, highlights the growing challenges individuals face in securing their financial futures.
Inflation has compounded these concerns, with 62% of workers identifying it as a significant obstacle to saving for a comfortable retirement. This is a substantial increase from 45% in the previous year.
While not all employees may be able to fund their 401(k) accounts up to the maximum limits, human resources professionals play a vital role in conveying this news to their workforce. Encouraging employees to consider deferring more money into their retirement accounts can help them build a more substantial financial cushion for their long-term savings goals.
In addition to the 401(k) changes, the IRS also raised the limit on annual contributions to Individual Retirement Accounts (IRAs) to $7,000, up from $6,500 in 2023. Although personal IRAs are not employer-sponsored plans, the amount account holders can contribute is influenced by whether they have a workplace retirement plan and their earnings. These adjustments provide greater flexibility for individuals seeking to enhance their retirement savings.
Remember, subscribe to ACA Daily and Member Alerts under your My ACA profile when logged in to acainternational.org to receive updates on the ACA Huddle.