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News: IRS Raised 401(k) Contribution Limit To $23,000 -

While inflation causes financial hardship for consumers households, there are upsides too. The IRS announced an increase in the pre-tax 401(k) limit - employees can contribute up to $23,000 of their salary towards retirement accounts in 2024.

A 401(k) is an employer-sponsored retirement plan that allows employees to contribute a portion of their income to the plan without having to pay taxes on it. This year the 401(k) plan limit is $22,500, but it will be raised by $500 for 2024. That means consumers will be able to contribute $23,000 to 401(k) retirements plans next year.

This $500 increase in the contribution limit also applies to employees who participate in 403(b) and most 457 plans, as well as the federal government's Thrift Savings Plan.

The IRS also boosted annual contribution limits to Individual Retirement Accounts (IRAs) to $7,000 from $6,500.

Retirement plan contribution limits are among those values that the agency is required to adjust every year to account for changes in the cost of living.

In addition to raising the retirement contribution limits, the IRS is also raising phase-out income thresholds that determine eligibility for a full or partial IRA tax deduction. The phase-out range increases to between $77,000 and $87,000 for single taxpayers; $123,000 to $143,000 for married couples filing jointly and $230,000 to $240,000 for IRA contributors who are not covered by a workplace retirement plan but is married to someone who is covered by a workplace retirement plan.

All cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2024 can be found in IRS Notice 2023-75.