2024 Contribution Limit Increases

Back in November, the Internal Revenue Service announced that they had changed contribution limits for most retirement savings plans for 2024. Most of those plans have been bumped up by $500. 

All retirement plans come with their own pros and cons, and it's important to look at different options when picking the right retirement account for you. For example, contributions to traditional IRAs and 401(k)s are made with pre-tax income, which lowers your overall taxable income for a given year. That also means you aren't taxed on contributions or earnings until you make a withdrawal. 

Another option is contributing to your 401(k). One of the advantages of contributing to your 401(k) is that they have much higher annual contribution limits than IRAs but may have fewer investment options. Roth IRAs, on the other hand, are taxed upfront, so any money invested grows tax-free over time. If you're in a lower tax bracket now than you anticipate being in during retirement, choosing a Roth can help reduce your overall tax burden.

While there are other differences between the accounts to consider, they're generally all good long-term investment accounts since they offer tax advantages, and the contributions will grow and compound over time.

The chart below shows a breakdown of all contribution changes for 2024 in comparison to 2023:

Information Published by: CNBC November, 2023

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