We are all more responsible than ever to save for our retirements. With this great responsibility comes the need to understand how much you can contribute to your plans and the benefits. Every year, usually in November, the IRS announces the changes for the coming year. This requires that you review how much you are currently putting away and adjust the amount for the coming year to stay in line with the increases that are announced. For our purposes today, we will simply address the two biggest forms of retirement savings for the families we serve, IRAs and 401ks.
IRA Limits for 2024
The IRA limits for 2024 have been increased to $7000 for those who are under the age of fifty years old. Those who are over the age of or turning fifty in 2024 can contribute an additional $1000 for a total of $8000 for the year. This represents a $500 per person increase over 2023.
401k Limits for 2024
Limits for 401ks also saw a nice increase for 2024 to $23,000 for those under the age of fifty. Participants who are over the age of fifty or who will be turning fifty in 2024 can contribute an additional $7500 to their plan for a total of $30,500. This represents a $500 per person increase over 2023 as well.
Historical Perspective
In the early 2000’s the limit for an IRA was merely $2000 (and there was no adjustment for age) and 401ks were capped at $10,500. These are two of the most common types of saving vehicles used by the families we serve, and it is important to know how these numbers change from year to year. Imagine that you and or your advisor did not speak about these changes or adjust your contributions, this could have a significant impact on your ability to retire or slow down. Not to mention the tax benefits you may have been losing out on for a very long time.
Importance of Staying Updated
Families that have the ability and intention of maxing out one of these options need to make sure they are adjusting their contributions to reflect the increases from year to year. We have had conversations where a family still is under the impression that the IRA limit is only two or three thousand dollars, and they were not aware of the current limits. This is wrong on so many levels and many advisors including their CPA, financial advisor, and others may have failed them. We even see people who do not realize monies can be put in an IRA for a non-working spouse, which changed several decades ago.
Financial Planning is Personal
Financial Planning is personal and not something that you can simply set and forget. You must be having conversations with your key advisors each year to make sure you are putting away the amount needed for you to work towards your goals and if you intend to max them out, that you are on the path to do that.
Schedule a Meeting
If you want to see if contributions to an IRA or 401(k) are right for you or if you should be updating the amount you contribute, please feel free to schedule a 30 Minute Zoom Meeting to see how we can assist.
This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal, and/or tax advice. Investing involves risk, including possible loss of principal. No strategy assures success or protects against loss. To determine what may be appropriate for you, consult your financial advisor.
