Retirement savers just got some great news: Contribution limits on 401(k)s and IRAs are climbing in 2024, so you may set aside even more money for your future. Below, we'll take a closer look at how the rules are changing, and what you can do to increase your retirement savings next year.
How much are contribution limits rising in 2024?
Both 401(k) and IRA contribution limits are receiving modest bumps in 2024 due to a cost-of-living adjustment. Currently, you can contribute up to $22,500 to a 401(k) and $6,500 to an IRA if you're under 50. Adults 50 and older can also make catch-up contributions of $7,500 and $1,000, bringing their 2023 contribution limits to $30,000 and $7,500, respectively.
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In 2024, contribution limits for 401(k)s and IRAs are both climbing by $500. Adults under 50 will be able to put up to $23,000 in a 401(k) and up to $7,000 in an IRA. Combined, that allows for $30,000 in retirement savings for those who can swing it.
Catch-up contribution limits are not rising next year. So those 50 and older will also see their maximum contributions rise by $500 to $30,500 for 401(k)s and $8,000 for IRAs. That's a total of $38,500.
Of course, these figures don't reflect the true value of this money, because it'll be invested for a while before you need to tap it. A $30,000 investment that earns a 10% average annual rate of return would be worth nearly $78,000 after 10 years, and it could be worth six figures by retirement if you're a few decades away from quitting the workforce.
How can you boost your retirement savings in 2024?
High contribution limits don't mean much if you aren't able to save for retirement, though. So it's important to have a strategy you can put into action as soon as the new year starts.
If you qualify for a 401(k) match, claiming this right away is a good idea if you can afford to do so. This is extra money your employer will give you for making contributions to your own retirement account. As of 2024, some employers may also be able to contribute to your retirement accounts if you make qualifying student loan payments. But if you don't do either of those things, you'll forfeit these funds.
It's worth noting that any money your employer puts into your 401(k) as part of a match doesn't count toward your annual contribution limit. So you can still contribute up to $23,000 here, and your employer can add extra for your match.
You might also consider putting any windfalls you have coming your way toward retirement savings. If you expect a holiday bonus or money from friends or family, consider stashing that in an IRA. You could also put your tax refund here when you get it.
Ideally, you'd also be able to defer a regular percentage of your income to retirement savings each month or pay period. But this depends on your budget. Think about what you can afford and do your best. And schedule check-ins with yourself once or twice per year to see how you're doing. Re-evaluate how much you're saving for retirement and up your contributions when you're able to do so.
Contribution limits will likely continue to rise over time, so if you're earning more in the future, you'll have time to catch up. Just make sure you stay aware of any changes related to your retirement accounts so you don't run into any trouble at tax time.
