Estimated reading time: 4 minutes
One of the simplest savings methods is funneling a greater percentage of funds into tax-advantaged accounts. This includes IRAs, Health Savings Accounts (HSAs), and Education Savings Accounts (ESAs). Whichever self-directed account you choose, make the most of your tax advantages by keeping up with:
- Income limits (your eligibility to contribute)
- Contribution limits (how much you can contribute)
Beyond the usual contribution limits, additional catch-up contributions are available for those aged 50 or older. Congress incentivizes older retirement plan participants to place a greater percentage of their assets in tax-advantaged accounts.
Despite the increased access, many SDIRA holders who are eligible fail to take advantage of their full contribution limits. The Secure Act 2.0 further emphasized the opportunities for catch-up contributions, setting out expanded limits for those aged 60-63 in the coming years.
There’s never been a better time to capitalize on tax-advantaged growth, for SDIRA holders of all ages.
In this post, we’ll cover the 2024 contribution limits for every self-directed retirement account, highlighting the recent changes in catch-up contribution opportunities.
Traditional IRAs
For traditional IRAs, almost everyone can contribute, but the income limit determines if your contribution is tax-deductible.
Traditional IRA Contribution Limits For 2024
- Up to age 50: $7,000
- Catch-up Contribution age 50+: $1,000
- Total Contribution if Over the Age of 50: $8,000
Traditional IRA Modified Adjusted Gross Income Limits
- Single Active Participant: $77,000 to $87,000
- Married Active Participant, Filing Joint Tax Return: $123,000 to $143,000
- Married Active Participant, Filing Separate Tax Returns: $0 to $10,000
- Spouse of an Active Participant: $230,000 to $240,000
Roth IRAs
For Roth IRAs, only people with a modified adjusted gross income (MAGI) under the income limit are eligible to contribute.
Roth IRA Contribution Limits
- Up to age 50: $7,000
- Catch-Up Contributions age 50+: $1,000
- Total Contribution if over the age of 50: $8,000
Roth IRA Contribution Limits MAGI Phase-Out Ranges
- Single Individuals: $146,000 to $161,000
- Married, Filing a Joint Tax Return: $230,000 to $240,000
- Married, Filing Separate Tax Returns: $0 to $10,000
Be aware that the limits for Roth and traditional IRAs are a combined limit for both accounts. For instance, if you’re 50 years or older and you’ve already contributed $5,000 to a traditional IRA, you may only contribute an additional $3,000 to a Roth IRA. This meets the combined maximum catch-up contribution limit of $8,000.
Self-Directed IRAs:The Basics Guide. Download Now >
Contribution Limits For Other Self-Directed Accounts
Traditional and Roth IRAs aren't the only tax-advantaged accounts subject to contribution limits. Here are the catch-up contribution limits for every other type of self-directed account.
Simple IRA Contribution Limits
- Employee Elective Deferrals: $16,000
- Catch-Up Elective Deferral Contribution Age 50+: $3,500
The Secure Act 2.0 brought many changes for SIMPLE IRA participants, hoping to bolster participation by broadening access for investors.
Starting in 2024, employers may treat certified student loan repayments as if they are employee elective deferrals.
Also in 2024, contribution limits will increase for workers who received at least $5,000 in compensation from employers with 25 or fewer employees. Their limits will increase by 10% above any normal cost-of-living adjustments.
For workers of more sizeable employers, their contribution limits will increase only if the employer provides a 4% employer matching contribution or a 3% non-elective contribution to all eligible employees.
For all other employees, SIMPLE IRA contribution limits will not change beyond the ordinary cost-of-living adjustments.
SEP IRA Contribution Limits
- SEP Employer Contribution Limits: Up to 25% of compensation of each employee (max of $69,000)
Individual 401(k) IRA Contribution Limits
- Employer Contributions: Up to the lesser of $69,000 or 25% of employee's compensation
- Employee Elective Deferrals: Up to $23,000
- Catch-Up Elective Deferral Contribution Age 50+: Up to $7,500
Note: Regular employee deferrals combined with profit-sharing contributions are capped at $69,000. Catch-up deferrals are not capped at $69,000. This provides individuals 50+ with a maximum contribution limit of $76,500 if their income supports the contribution.
For example, Jane is a 55-year-old self-employed individual. Her earned income for the year is $100,000. Jane chooses to max out her employee elective deferral, including catch-up contributions, of $30,500. In addition, her business contributes 25% of her earned income, or $25,000. This gives Jane a total 401(k) contribution of $55,500. This is the most she can contribute for this tax year.
Health Savings Account Contribution Limits
- Single Coverage: $4,150
- Family Coverage: $8,300
- Plus $1,000 catch-up contribution if you are age 55+
Educational Savings Account Contribution Limits
-
Per year per child: $2,000
Future Increases in Catch-Up Contributions
The Secure Act 2.0 enacted dozens of changes to individual and workplace retirement plans in the hopes of increasing participation. One of the most significant changes for SDIRA holders is the establishment of future increases in catch-up contribution limits.
First, the Secure Act 2.0 indexed annual IRA catch-up contribution limits for future cost-of-living adjustments. This practice of indexing catch-up contribution limits begins in the 2024 tax year.
Second, the Secure Act 2.0 will introduce an additional catch-up contribution in certain employer-sponsored plans for those aged 60-63.
For 401(k)s beginning in the 2025 tax year, this limit will be the greater of
- $10,000, or
- 150% of the regular catch-up amount for those aged 50 or older
For SIMPLE IRAs beginning in the 2025 tax year, this limit will be the greater of
- $5,000, or
- 150% of the regular catch-up amount for those aged 50 or older
Keep Up With Rising Catch-Up Contribution Limits
In recent years, supply chain shocks and inflation have led the Consumer Price Index to become more volatile. Cost-of-living uncertainty means that changes in contribution limits are likely to become more frequent for SDIRA holders.
After all, an additional $500 in an IRA can lead to returns many times over in the decades to come. As you fine-tune your investment strategy, visit Entrust’s IRA Contribution Limits page to make the most of your tax-advantaged accounts.
Once you’ve settled on your investment plan, spring into the year with confidence by taking control of your portfolio. Consider funding a self-directed, tax-advantaged account at Entrust.
With over 40 years of experience in retirement account services, our knowledgeable staff is ready to help you work toward your 2024 investing goals. Schedule a call with one of our experienced IRA experts to set your savings up for success.
Unlock Your Investing Potential With Entrust! Open my account now
0 Comment