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401(k) Contribution Limits for 2024

401(k) Contribution Limits for 2024

| April 10, 2024

If you’re among the 72 million Americans participating in a 401(k) plan, here’s some good news: the IRS has raised your contribution limits for 2024. 

Every year in October or November, the IRS reviews contribution limits, or how much money you’re allowed to sock away in certain retirement savings and investment accounts. Sometimes, the agency decides to adjust the limits. 

In November 2023, the IRS announced that the contribution limit for 401(k)s would increase to $23,000 in 2024, up from $22,500 the previous year. This includes 403(b)s and most 457 plans, as well as the federal government’s Thrift Savings Plan. 

Note that these limits could change if the IRS sees fit to make cost-of-living adjustments, though that rarely happens. 

Learn more about the 401(k) contribution limits and other retirement savings plans you might put your money in. 

More on the IRS’s 401(k) Contribution Limits in 2024 

If you’re already putting money into a company-sponsored 401(k), great. If not, what are you waiting for? A 401(k) is one of the easiest ways to save for retirement. And now, you can save even more. 

While the contribution limit across the board for your 401(k) rose by a little more than 2%, the catch-up contribution for workers 50 and older remained at the 2023 level of $7,500. That means if you’re 50 or older, you can now contribute up to $30,500 to your 401(k) annually. 

The contribution limits include all of your salary deferrals, or pre-tax dollars, as well as any contributions you make to a Roth 401(k). You can stash away no more than $23,000 this year in all of your 401(k) accounts, or up to $30,500 if you’re 50 or older. 

Employer Contributions 

There’s another good reason to contribute to your company’s 401(k): many employers also add money to 401(k) accounts on behalf of employees. Employer contributions typically match the amount the employee puts in, ranging from $0.50 to $1 for each dollar contributed. That’s like getting free money from your employer. 

It gets even better. The IRS also raised the ceiling on the total contributions that can be made to your 401(k) this year (also known as the general limit), which includes your pre-tax contribution and your employer’s matching contribution. 

Whether you make contributions or not, your employer can elect to do so. The general limit for contributions from you or your employer increased to $69,000 in 2024. In 2023, the amount was $66,000 or 100% of an employee’s salary, whichever was less. 

Again, if you’re 50 or older, you can pile another $7,500 for your catch-cup contribution on top of that general limit for a total maximum contribution of $76,500 in 2024. 

An employer match arrangement for your 401(k) allows you to save more in less time, maximizing your nest egg without forcing you to work more or diversify your sources of income. 

After-Tax Contributions to Your 401(k) 

A Vanguard study found that just 14% of Americans max out their 401(k)s with tax-deferred contributions. That means a lot of people are missing out on an opportunity to build an even bigger nest egg for retirement through an employer-sponsored 401(k). 

If you have money left over after contributing the maximum pre-tax dollars to your 401(k), you also can make after-tax contributions if your employer allows it. Check your 401(k) plan if you have online access, or ask your employer or plan administrator for more information. 

Any after-tax contributions to your 401(k), combined with your tax-deferred contributions and employer match, count toward the general limit of $69,000 (76,500 if you’re 50 or older). 

This refers to the after-tax dollars you put into your regular 401(k), which allows you to contribute more than the $23,000 cap on pre-tax dollars. It’s not to be confused with the after-tax dollars that go to a Roth 401(k). 

Discuss Your 401(k) Options With a Financial Professional 

Beyond the contribution limits to your 401(k), you might have various tax advantages and investment options worth considering. The financial advisors at Good Life Morehead City can guide you through the retirement planning process with unmatched competency and support. 

If you have questions about the recent IRS adjustments or want to learn more about 401(k)s or other retirement savings plans, contact Good Life Morehead City to set up an appointment.