Individual retirement accounts (IRAs) provide tax benefits for retirement, but there are annual contribution limits, and exceeding them can carry consequences.

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The combined annual contribution limit in 2024 for a traditional and Roth IRA is $7,000 for those younger than age 50 and $8,000 for those 50 and older (since the latter are eligible for catch-up contributions). In 2023, the contribution limits were $6,500, or $7,500 for taxpayers who are 50 or older. The annual contribution limits for SIMPLE IRAs and SEP-IRAs, which are used by small businesses and the self-employed, are higher.

Here's what you need to know about contribution limits for different types of IRAs.

Contribution limits for traditional and Roth IRAs

Traditional IRA contributions give you a tax deduction the year you make them, but you owe taxes on your withdrawals. Roth IRAs allow after-tax contributions only, but you're able to withdraw your money tax-free once you're at least age 59 1/2 and have had the account for at least five years.

There is an aggregate limit on the amount you can contribute to a traditional and Roth IRA. For 2023, it is $6,500 for those younger than 50, while catch-up contributions bring the limit up to $7,500 for those 50 and older. The IRS raises the limit every few years due to inflation. The 2024 contribution limits increase to $7,000, or $8,000 for those 50 and older.

A nonworking person who files a joint tax return with their spouse also has the option to contribute to a spousal IRA as long as their spouse has earned enough taxable income to cover IRA contributions made for both. Spousal IRAs can be either traditional or Roth IRAs.

Each spouse is allowed to contribute up to the current annual limit. However, total combined contributions cannot exceed the taxable compensation reported on the joint tax return.

The IRS sets annual IRA contribution limits for both traditional and Roth IRAs. The table below shows the aggregate contribution limits for these two accounts by tax year for the past decade.

Data source: IRS.
Tax Year Basic Contribution Limit/Non-Working Spouse Contribution Limit Catch-Up Contribution
2015 $5,500 $1,000
2016 $5,500 $1,000
2017 $5,500 $1,000
2018 $5,500 $1,000
2019 $6,000 $1,000
2020 $6,000 $1,000
2021 $6,000 $1,000
2022 $6,000 $1,000
2023 $6,500 $1,000
2024 $7,000 $1,000

You are eligible to contribute to an IRA regardless of whether you also contribute to a 401(k), and 401(k) contributions do not affect limits on the IRA contributions listed above.

However, if either you or your spouse is covered by a workplace retirement plan, eligibility for deductible contributions to a traditional IRA begins to phase out at higher income levels. If your income is too high for you to make deductible contributions, you may still make nondeductible contributions up to the annual limit.

Higher earners are not eligible to make direct Roth IRA contributions at all. However, they can make backdoor Roth IRA contributions -- meaning they can make traditional IRA contributions and do a Roth IRA conversion in the same year. It gets you to the same place but requires you to jump through a few more hoops.

SEP-IRA contribution limits

SEP (Simplified Employee Pension) IRAs are created by employers, and self-employed people also have the option to create them. Only employers contribute to SEP-IRAs, with all contributions being made with pre-tax funds.

Your SEP-IRA contribution limit for 2024 is the smaller of:

  • 25% of employee compensation
  • $69,000 (up from $66,000 in 2023)

For self-employed workers, the 25% limit is based on net income. To calculate the maximum contribution, you must subtract any SEP-IRA contribution you plan to make, as well as the employer portion of payroll taxes, from gross income. Usually you'll end up being able to contribute around 20% of gross income after doing this calculation.

You're not allowed to make catch-up contributions to a SEP-IRA, regardless of your age. However, contributions do not affect your ability to make regular contributions or catch-up contributions to a Roth IRA. You can also make deductible contributions to a traditional IRA as long as your income isn't too high for you to qualify.

SIMPLE IRA contribution limits

SIMPLE (Savings Incentive Match PLan for Employees) IRAs are also commonly used by small businesses and can receive contributions from employees and employers. Contributions are made with pre-tax funds, like traditional IRAs.

Employees are allowed to make contributions out of their salaries of up to $16,000 in 2024 (up from $15,500 in 2023). Employees older than 50 are eligible to make catch-up contributions of up to $3,500 in both 2023 and 2024.

Employee contributions are considered "elective deferrals," so they count toward the combined annual limit employees can make to all plans accepting elective deferrals, including 401(k) plans. This means that if you contribute to a SIMPLE IRA, you will reduce the amount you can contribute to a 401(k).

Employers are required to make matching contributions to SIMPLE IRAs using one of two approaches:

  • They can make nonelective contributions of 2% of compensation up to a compensation limit of $345,000 in 2024 (up from $330,000 in 2023). This means employers must contribute to all workers' SIMPLE accounts, whether the workers contribute any funds of their own or not.
  • They can match employees' salary-reduction contribution dollar for dollar up to 3% of compensation, which is not subject to the $345,000 compensation limit.

Employers are allowed to reduce the 3% matching contributions, but they may not reduce them below 1% -- and employers cannot reduce the contribution below 3% for more than two calendar years out of the five-year period ending in the calendar year the reduction is effective. Employers must also give employees a reasonable time to decide how much to contribute.

Do IRA rollovers count as contributions?

IRA rollovers occur when a worker rolls over money from a tax-advantaged retirement account into an IRA. For example, if you leave your job, you could roll over your 401(k) into your traditional IRA.

Rollovers do not count toward annual contribution limits or affect your ability to make contributions to your retirement accounts. 

Making excess IRA contributions has consequences

Excess IRA contributions are subject to a 6% tax penalty. This penalty applies for each year in which the excess amount remains in your retirement plan.

To avoid being subject to this penalty, you must withdraw the excess contribution and any income earned from it by the due date of your individual income tax return, including extensions. So during a typical tax year, you must withdraw the excess contribution by April 15, or Oct. 15 if you filed for an extension.

Keep an eye on changes to the IRA contribution limits over the years, particularly if you like to max yours out, if you're a high earner, or if you're contributing to multiple retirement accounts. This can help you avoid running into trouble with the IRS.

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