Each year, the IRS announces new contribution limits to various retirement plans (and certain deduction items) to account for inflation.
If you consistently contribute any amount to a retirement plan, you are already doing much better than everyone who has no retirement savings at all. If you can slightly raise the amount you contribute to any retirement funds, you are doing even better. Incremental improvement each year goes a long way towards building a stable financial foundation for your later years.
As 2023 draws to a close, it is time to start thinking about financial moves you will make in 2024. Considering your investment goals can help you create a targeted budget that considers any pay adjustments you receive or benefit elections you change going into 2024. Read on if you want to take this a step further and maximize your retirement contributions in 2024!
401(k)/403b/457 plans
The 401(k), 403(b), and 457 plans are retirement accounts offered through your employer. (Self-employed folks also have the option to “offer” themselves a solo 401(k) plan that has its own set of requirements.) In 2023, the maximum contribution limit for an individual was $22,500. For 2024, the contribution limit is:
$23,000
Additionally, individuals who are age 50 or older by the end of the year may contribute an extra $7,500 as a “catch-up” contribution. (The “catch-up” contribution limit is unchanged from 2023.) If you are 50 or older, this brings your total contribution limit to $30,500.
These limits only include your contributions. It does not include any employer match.
Your choice to contribute to a traditional 401(k), Roth 401(k), or both does not impact the limit. Also, the $23,000 limit applies to each individual for the entire calendar year, not per account (i.e., traditional or Roth) or per job. If you contribute to a 401(k) at multiple jobs during the year, whether or not those jobs overlap, you need to make sure you stay within the annual limit.
While you can front-load contributions at the beginning of the year, most employees contribute a consistent portion of each paycheck to their 401(k) or other retirement vehicle. Additionally, some employers match contributions on a per-pay period basis, so it may be wise to contribute all year long.
If you want to maximize your contributions in 2024, here is a breakdown for how much you should contribute each paycheck, based on your pay schedule:*
Monthly (12 paychecks): $1,916.66^
Semi-monthly (24 paychecks): $958.33^
Bi-weekly (26 paychecks): $884.61^
Weekly (52 paychecks): $442.30^
If you will be at least 50 years old by the end of the year and want to maximize your $7,500 catch-up contributions, here is a breakdown for how much you should contribute each paycheck in addition to the above amounts, based on your pay schedule:*
Monthly (12 paychecks): $625.00
Semi-monthly (24 paychecks): $312.50
Bi-weekly (26 paychecks): $288.46^
Weekly (52 paychecks): $144.23^
Health Savings Account (HSA)
An HSA is an account where you can contribute pre-tax money and use it tax-free for qualified medical expenses. You can also allow it to grow tax-free and eventually use it as a retirement account (similar to a traditional IRA). You must be enrolled in an HSA-eligible (i.e., high-deductible) health plan to contribute to an HSA—but once established, you can continue to use the HSA for as long as you own it, even if you can no longer contribute. In 2023, the HSA contribution limit for individuals with self-only coverage in an HSA-eligible health plan was $3,850, and for household coverage the contribution limit was $7,750. For 2024, that contribution limit has been raised to:
$4,150 for self-only
$8,300 for household
Additionally, individuals who are age 55 or older by the end of the year may contribute an extra $1,000 as a “catch-up” contribution. The HSA catch-up contribution limit is unchanged from 2023. (Note that the age eligibility for catch-up contributions is different for an HSA versus a 401(k) or IRA.) This brings the total for individuals age 55 or older to $5,150 for self-only coverage and $9,300 for household coverage.
If you want to maximize your contributions this year for yourself only, here is a breakdown for how much you should contribute each paycheck, based on your pay schedule:*
Monthly (12 paychecks): $345.83^
Semi-monthly (24 paychecks): $172.91^
Bi-weekly (26 paychecks): $159.61^
Weekly (52 paychecks): $79.80^
If you want to maximize your contributions in 2024 for a household/family, here is a breakdown for how much you should contribute each paycheck, based on your pay schedule:*
Monthly (12 paychecks): $691.66^
Semi-Monthly (24 paychecks): $345.83^
Bi-Weekly (26 paychecks): $319.23^
Weekly (52 paychecks): $159.61^
If you will be at least 55 years old by the end of the year and want to maximize your $1,000 catch-up contributions, here is a breakdown for how much you should contribute each paycheck in addition to the above amounts, based on your pay schedule:*
Monthly (12 paychecks): $83.33^
Semi-monthly (24 paychecks): $41.66^
Bi-weekly (26 paychecks): $38.46^
Weekly (52 paychecks): $19.23^
Individual retirement account (IRA)
An IRA is an individual retirement vehicle that you can set up on your own, regardless of your employment location or status. You can contribute to an IRA if you or your spouse have earned income. In 2023, the contribution limit for an individual was $6,500. For 2024, that contribution limit has been raised to:
$7,000
Additionally, individuals who are at least 50 years old by the end of the year may contribute an extra $1,000 as a “catch-up” contribution. (The IRA catch-up contribution limit is unchanged from 2023.) This means any individual age 50 or older may contribute $8,000 to an IRA for 2024.
You cannot contribute more than your “earned income” for the year (or you and your spouse’s combined income, if you file jointly). If your earned income—i.e., wages and/or income subject to self-employment tax—is below these amounts, your earned income is your IRA contribution limit for the year.
These limits apply whether you contribute to a traditional IRA or a Roth IRA (or both).
Roth IRAs are funded with after-tax money, so you get no deduction initially, but qualified distributions—if you are at least age 59.5 and have had the account for at least five years—are completely tax-free.
Traditional IRAs are funded with pre-tax money, so you get a deduction initially, but distributions are taxable at the then-prevailing rates. (If you take a distribution prior to age 59.5, you will also pay an early-withdrawal penalty.)
Whichever choice is right for you, $7,000 is the contribution limit that applies to all IRAs for 2024. You can contribute the entire $7,000 to a traditional IRA, the entire $7,000 to a Roth IRA, or split your contributions between the two. You cannot contribute $7,000 to each: it is a cumulative amount.
If you want to maximize your contributions in 2024, here is a breakdown for how much you should contribute each paycheck, based on your pay schedule:*
Monthly (12 paychecks): $583.33^
Semi-monthly (24 paychecks): $291.66^
Bi-weekly (26 paychecks): $269.23^
Weekly (52 paychecks): $134.61^
If you will be at least 50 years old by the end of the year and want to maximize your $1,000 catch-up contributions, here is a breakdown for how much you should contribute each paycheck in addition to the above amounts, based on your pay schedule:*
Monthly (12 paychecks): $83.33^
Semi-monthly (24 paychecks): $41.66^
Bi-weekly (26 paychecks): $38.46^
Weekly (52 paychecks): $19.23^
Roth IRA income limits
The income limits for contributing to a Roth IRA are also increasing in 2024.
Anyone can contribute to a traditional IRA regardless of income level, but the deductibility of those contributions is limited at certain income levels if you are covered by a retirement plan at work.
If you would like to contribute to a Roth IRA rather than a traditional IRA but make too much money, a backdoor Roth may be for you.
Taxpayers filing as single or head of household will have a reduced Roth IRA contribution limit beginning at $146,000 of income (up from $138,000 in 2023); the limit becomes zero when income reaches $161,000 (up from $153,000).
Taxpayers using the married filing jointly or qualifying widow(er) status have a reduced contribution limit beginning at $230,000, with a limit of zero when income reaches $240,000. (For 2023, this phase-out range is $218,000 to $228,000.) Married taxpayers filing separately follow the “single” limit if they did not live with their spouse at any point during the year, but have a reduced limit immediately, and a limit of zero when income reaches only $10,000.
To maximize or not to maximize?
If you maximize all these accounts next year, that means you will invest $38,300 towards your future, assuming you are contributing to an HSA for your entire household and are not yet old enough to make additional catch-up contributions. In a few unique employment situations, you can contribute more, but maximizing these contributions will already put you in a good position for investing for retirement.
Contribution Limit for 2024 | Additional Catch-Up | |
401(k)/453(b)/457 | $23,000 | $7,500 (age 50) |
HSA | $4,150 (self-only) $8,300 (household) | $1,000 (age 55) |
IRA | $7,000 | $1,000 (age 50) |
If you cannot contribute the maximum amount to all these accounts, that is okay! Challenge yourself to raise your contributions a bit to a preexisting account, or open one of these accounts that you do not have yet. Thanks to compound interest, every dollar you contribute now will be $2 in 2031!
* = Some employers will only let you contribute a whole dollar amount or only a specific percentage. If this is the case for you, you can make your contribution slightly higher or lower and adjust it for a single paycheck at the end of the year to maximize your contributions. For example, Xa must contribute a percentage for her 401(k), so she contributed the same percentage all year and brought the percentage down 1% for her final paycheck so she is just under the maximum.
^ = Amounts are rounded down rather than to the closest cent to prevent exceeding the contribution limits.
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