You can save up to $23,000 in your 401(k) next year, IRS says

Retirement savers can tuck away slightly more in 2024 than in 2023, but this year’s contribution increases are more modest than last year’s, according to new inflation-related adjustments released by the IRS.

People who are building up their 401(k) accounts will be able to contribute a maximum of $23,000, a more than 2% increase from the $22,500 maximum for 2023.

IRA contribution limits will climb to $7,000 for 2024, a 7.6% increase over the $6,500 limit in 2023.

When the IRS announced its adjustments for 2023, 401(k) savers got a big increase of nearly 10% year over year, and the IRA contribution limit went up more than 8%.

The 2024 adjustments reflect an economy where inflation rates, although cooling, are still warm.

For 2024, the catch-up amount for workers 50 and older is holding at a maximum of $1,000 on IRA contributions and of $7,500 for people with 401(k)s and other defined-contribution plans, the IRS said.

The IRS numbers set a limit on how much people can set aside each year in 401(k) accounts, but data suggest many people fall far short of those maximums.

In 2022, people with retirement accounts through Vanguard had an average account balance of $112,572. The median account balance was $27,376, the wealth-management giant reported.

The new retirement-account contribution limits are part of the tax code’s yearly changes to account for inflation.

Taxpayers are still awaiting the IRS adjustments for tax brackets, standard-deduction amounts and other provisions for tax year 2024.

The tax agency adjusted the ranges on income-tax brackets last year by 7%.

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