In an effort to support retirement savers, the Internal Revenue Service (IRS) has announced that the contribution limits for 401(k) and various retirement accounts will be raised in 2024. As reported by The Hill, the IRS cited the rising cost of living as the reason behind the increase.

Individual contribution limits for 401(k), 403(b), most 457 plans, and the government's Thrift Savings Plan will be raised by $500 to $23,000. For individuals aged 50 or older, an additional catch-up contribution of $7,500 will be allowed, making the total limit $30,500.

These retirement savings accounts enable employees to set aside tax-deferred funds, thereby lowering their overall taxable income. The increased contribution limits will provide individuals with more opportunities to save for their future and meet their retirement goals. This is particularly beneficial for those looking to "catch up" on their savings later in their careers.

Individual Retirement Account (IRA) contributors will also experience an increase in their contribution limits. In 2024, the limit will be raised from $6,500 to $7,000. Individuals aged 50 or older will have a catch-up contribution limit of $8,000. IRAs offer tax advantages by allowing investors to withdraw their savings tax-free after several years of growth.

The IRS is not only raising contribution limits but also adjusting income thresholds for IRA holders. For singles and heads of household, the range for making contributions to a Roth IRA will be between $146,000 and $161,000, an increase of $8,000. Married couples filing jointly will see an income phase-out range of $230,000 to $240,000, a jump of $12,000. The income phase-out range for a married individual filing separately remains between $0 and $10,000 and is not subject to an annual adjustment based on the cost of living.

The SIMPLE plan, which caters to small-business employees and self-employed individuals, will also see an increase in contribution limits. In 2024, SIMPLE contributors will be able to invest $16,000, up from $15,500.

Furthermore, the IRS has made changes to income thresholds for low- and moderate-income workers who qualify for the Saver's Credit, also known as the Retirement Savings Contributions Credit. Married couples filing jointly will now qualify with an income of up to $76,500, up from $73,000. Heads of household can qualify with an income of up to $57,375, up from $54,750. Singles and married individuals filing separately will be eligible with an income of up to $38,250, up from $36,500.

To provide detailed information on these changes, the IRS has published a comprehensive breakdown on its website for reference.

Overall, the IRS's decision to increase retirement contribution limits for 2024 aims to facilitate better financial planning and provide individuals with greater flexibility to save for their retirement years.