Solo 401(k) and Individual Retirement Arrangement (IRA) are just some of the retirement plans that self-employed individuals, small business owners, or independent contractors may want to have for self-initiated savings for the future. And there will be more savings opportunity for your retirement as the Internal Revenue Service (IRS) announced an increase in these plans’ contribution limits and phase-out ranges for the upcoming year.
Increase in Contribution Limits
Presented below are the contribution limits for Solo 401(k) and IRA. Catch-up adjustment limit for employees aged 50 and over will remain the same in 2024 at $7,500 and $1,000 for Solo 401(k) and IRAs, respectively.
| Solo 401(k) | 2024 | 2023 |
|---|---|---|
| Employee Contribution Limit | $23,000 | $22,500 |
| Employee Contribution Limit with catch-up adjustment (for aged 50 and over) | $30,500 | $30,000 |
| Individual Retirement Arrangements (IRAs) | 2024 | 2023 |
|---|---|---|
| Annual Contribution Limit | $7,000 | $6,500 |
| Annual Contribution Limit with catch-up adjustment (for aged 50 and over) | $8,000 | $7,500 |
Phase-out Ranges for Traditional IRAs
Contributions to traditional IRAs are generally tax deductible. However, if you or your spouse receives retirement coverage from work, its deductibility may be reduced or phased out depending on your filing status and income. Favorably, the income phase-out range is also higher for 2024.
| Filing Status | Phase-out Range | |
| 2024 | 2023 | |
| Single Filers covered by workplace retirement plan | $77,000 and $87,000 | $73,000 and $83,000 |
| Married Filing Jointly covered by a workplace retirement plan | $123,000 and $143,000 | $116,000 and $136,000 |
| Married Filing Jointly (spouse is covered by a workplace retirement plan) | $230,000 and $240,000 | $218,000 and $228,000 |
| Married Filing Separately covered by a workplace retirement plan | $0 and $10,000 | $0 and $10,000 |
Phase-out Ranges for ROTH IRAs
Contributions to ROTH IRAs may have no outright tax benefit but this type of plan allows you to receive tax-free distributions during retirement. However, this type of plan is not made for the high-income earners as individuals with earnings exceeding the income threshold for ROTH IRAs are not allowed to make a contribution. The good news is there’s a workaround to this income limit by using a backdoor ROTH IRA. And on top of that, the phase out-range for ROTH IRA contributors will also increase in 2024.
| Filing Status | Phase-out Range | |
| 2024 | 2023 | |
| Single Filers and Head of Household | $146,000 and $161,000 | $138,000 and $153,000 |
| Married Filing Jointly | $230,000 and $240,000 | $218,000 and $228,000 |
| Married Filing Separately | $0 and $10,000 | $0 and $10,000 |
Still don’t have a retirement plan? Interested in ROTH but not eligible? Our tax consultant and retirement expert can help you navigate and choose the best retirement plan that will work for your specific situation and needs. Book a consultation now.
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