IRAs, or individual retirement accounts, are tools that can help you save and invest money for retirement. Each year, there are limits on how much you can contribute and deduct from taxes, and these limits can be influenced by your income.
In 2023, the contribution limit for IRAs, both standard and Roth, increased by $500, and it will rise by another $500 in 2024. This means that in 2024, you can contribute up to $7,000 to an IRA if you’re under 50 years old, and up to $8,000 if you’re 50 years old or above.
What is an Individual Retirement Account?
An Individual Retirement Account (IRA) is a savings tool that provides tax benefits for retirement savings. IRAs are especially useful for people who don’t have access to employer-sponsored retirement plans like the 401(k). Even if you have a 401(k) at work, you can still open and contribute to an IRA. The main limit is how much you can contribute each year.
IRA Contribution Limit Overview for 2024
Here’s a quick look at the IRA contribution limits for 2024:
- For those under 50 years old: $7,000
- For those 50 years old and above: $8,000
- This is a $500 increase from the 2023 limits.
Roth IRA Contribution News
Contributions to a Roth IRA are made with after-tax dollars, which means you won’t get a tax deduction for the year you make the contribution. However, the withdrawals you make during retirement are tax-free. Roth IRAs don’t have required minimum distributions (RMDs), so you aren’t forced to withdraw money if you don’t need it.
For 2023 and 2024, the contribution limits for Roth IRAs are the same as for traditional IRAs. The income phase-out ranges are slightly different:
- For single filers, the phase-out range is $138,000 to $153,000 in 2023 and $146,000 to $161,000 in 2024.
- For married couples filing jointly, the phase-out range is $218,000 to $228,000 in 2023 and $230,000 to $240,000 in 2024.
Simple IRA Contribution News
The SIMPLE IRA is aimed at small businesses and self-employed individuals. Contributions to SIMPLE IRAs can come from both the employer and the employee, and all contributions are tax-deductible. This can potentially lower the tax rate for both the business and the employee.
For 2023, the employee contribution limit is $15,500, with a catch-up limit of $3,500 for those aged 50 and above. In 2024, the contribution limit will increase to $16,000, while the catch-up limit remains at $3,500.
Traditional IRA Contribution News
Contributions to traditional IRAs are usually tax-deductible. This means if you contribute $4,000 to a traditional IRA, your taxable income for the year decreases by that amount. Unlike Roth IRAs, there is no income limit for contributing to a traditional IRA, but the amount you can deduct might be limited based on your income and filing status.
For 2023, the maximum contribution to a traditional IRA is $6,500, with an additional $1,000 catch-up contribution for those 50 and older, totaling $7,500. In 2024, the contribution limit will rise to $7,000, and the catch-up amount remains $1,000.
The IRS has increased IRA contribution limits to help keep up with rising living costs due to inflation. It’s a good idea to maximize your contributions to both IRAs and any employer-sponsored retirement plans if you can. You might also want to consider a health savings account (HSA), which offers various tax benefits and can also be invested.
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1. What is the new IRA contribution limit for 2024?
The new contribution limit for 2024 is $7,000 for those under 50 years old and $8,000 for those 50 years old and above.
2. Are Roth IRA contributions tax-deductible?
No, Roth IRA contributions are made with after-tax dollars and are not tax-deductible.
3. Can I contribute to both a 401(k) and an IRA?
Yes, you can contribute to both a 401(k) and an IRA, but there are limits on how much you can contribute to each.
4. What is the phase-out range for Roth IRA contributions in 2024?
For single filers, the phase-out range is $146,000 to $161,000. For married couples filing jointly, it is $230,000 to $240,000.
5. How much can I contribute to a SIMPLE IRA in 2024?
In 2024, the contribution limit for a SIMPLE IRA is $16,000, with a catch-up limit of $3,500 for those aged 50 and above.