After last year’s historic cost-of-living adjustments (COLAs), the changes for 2024 are more modest. While inflation remains a concern for many, it has moderated a bit; but still, many of the contribution and compensation figures from 2023 have increased for the coming tax year. This means that you may consider boosting the amount that you contribute to your IRA or workplace retirement plan to keep pace with inflation and to improve your retirement readiness.

Another factor to consider as we near another year end: In what other ways can your self-directed IRAs (SDIRAs) and other investments help you hedge against inflation and increase your investment returns? SDIRAs can potentially provide an excellent alternative to more traditional investments. Even as we now hear banks and credit unions touting their rising interest rates on time deposits, we understand that these increasing rates are mostly following the increase in the cost of living. But to get ahead of inflation, SDIRAs may give you more flexibility. In addition, some SDIRA investments may also act as a hedge against a general market downturn. What works best for you may be quite different from the approach that others take, so always seek competent professional advice when you invest.

 

TRADITIONAL AND ROTH IRAs

 

HOW MUCH CAN I CONTRIBUTE TO AN IRA?

You are allowed to contribute 100% of your compensation to your IRA—up to the annual contribution limit. If you have reached age 50 in any tax year, you may also make an additional “catch-up contribution” each year.

Traditional & Roth IRA Contributions	2024	2023	2022
Contribution Limit	$7,000	$6,500	$6,000
Catch-up Contribution	$1,000	$1,000	$1,000

 

WHO CAN DEDUCT A TRADITIONAL IRA CONTRIBUTION?

You can deduct your Traditional IRA contribution unless either you or your spouse participates in an employer-sponsored retirement plan, such as a 401(k) plan. In that case, your deductibility depends on your modified adjusted gross income (MAGI) and your tax-filing status. See the table below.

Income Limits for Deducting a Traditional IRA Contribution	2024	2023	2022
Single filer, participating in an employer’s retirement plan	$77,000 – $87,000	$73,000 – $83,000	$68,000 – $78,000
Married, filing a joint tax return, and participating in an employer’s retirement plan	$123,000 – $143,000	$116,000 – $136,000	$109,000 – $129,000
Married, filing a joint tax return, and your spouse is participating in an employer’s retirement plan, but you are not	$230,000 – $240,000	$218,000 – $228,000	$204,000 – $214,000
Married, filing a separate tax return	$0 – $10,000	$0 – $10,000	$0 – $10,000

For example, consider someone who is married, files a joint tax return for 2024, and participates in a 401(k) plan at work. If the couple’s MAGI is over $143,000, no deduction is permitted. If the MAGI is under $123,000, a full deduction is allowed. And if the MAGI is between $123,000 and $143,000, only a portion of the contribution is deductible.

 

WHO CAN CONTRIBUTE TO A ROTH IRA?

MAGI also determines whether you can contribute to a Roth IRA. If your MAGI is greater than the limits in the chart below (based on your marital status), you cannot make a Roth contribution. If it’s less than the limit, you may contribute the full Roth IRA amount. And if your MAGI is within the threshold range, you are eligible for a partial contribution.

Income Limits for Contributing to a Roth IRA	2024	2023	2022
Single filer	$146,000 – $161,000	$138,000 – $153,000	$129,000 – $144,000
Married, filing a joint tax return	$230,000 – $240,000	$218,000 – $228,000	$204,000 – $214,000
Married, filing a separate tax return	$0 – $10,000	$0 – $10,000	$0 – $10,000

 

SEP, SIMPLE, & 401(k) PLANS

SEP PLAN CONTRIBUTION LIMITS

In a simplified employee pension (SEP) plan, the employer makes contributions to the Traditional IRA of eligible employees. The employer may contribute up to 25% of an employee’s compensation, but it cannot exceed the dollar limit below. And employee payments over the compensation cap cannot be considered.

SEP IRA Plan	2024	2023	2022
Minimum Compensation to Be Eligible	$750	$750	$650
Maximum Employer Contribution	$69,000	$66,000	$61,000
Compensation Cap	$345,000	$330,000	$305,000

 

SIMPLE IRA PLAN CONTRIBUTION LIMITS

Two types of contributions may be made through a SIMPLE IRA plan. First, eligible employees may defer their compensation into a SIMPLE IRA, up to the annual limit. (Those age 50 and older can make additional catch-up contributions.) Second, the employer generally must make either a 3% matching contribution or a 2% contribution to all eligible employees.

SIMPLE IRA Plan	2024	2023	2022
Maximum Employee Contribution	$16,000	$15,500	$14,000
Age 50 Catch-Up Contribution	$3,500	$3,500	$3,000

 

401(k) PLAN CONTRIBUTION LIMITS

The following limits apply to 401(k) plans, 403(b) plans, and governmental 457(b) plans.

Employer Retirement Plan	2024	2023	2022
Maximum amount of compensation considered for contribution calculations (compensation cap)	$345,000	$330,000	$305,000
Maximum amount of salary you may defer into the plan	$23,000	$22,500	$20,500
Maximum age 50 catch-up contribution (in addition to the salary deferral limit and total plan limit)	$7,500	$7,500	$6,500
Total plan contribution limit	$69,000	$66,000	$61,000
Highly compensated employee compensation threshold for nondiscrimination testing	$155,000	$150,000	$135,000
Key employee compensation threshold for nondiscrimination testing	$220,000	$215,000	$200,000
Maximum compensation subject to Social Security taxes	$168,600	$160,200	$147,000

 

MORE RESOURCES

You can find more information on COLAs, contributions, retirement plans, and more in our Self-Directed IRA Knowledge Center. You can view the full news release for 2024 COLA changes on the IRS website. Download STRATA’s IRA Annual Limits Chart for a quick comparison of this year’s IRS COLA changes. Our financial calculators can also help you choose the best option for your retirement savings.