Maximum 401k Contribution Limits for 2024

The IRS announced on Nov 6, 2023 that employees in 401(k) plans will be able to contribute up to $23,000 in 2024 up from $22,500 in 2023

The catch-up contribution limit for employees aged 50 and over who participate in these plans stays at $7000.

To summarize here is how the 401(k) plan limits will change in 2024:

• The 401(k) contribution limit increases to $23,000.
• The 401(k) catch-up contribution limit stays at $7500 for those age 50 and above.
• The limit for employer and employee contributions will be $69,000. ($76,500 with catchup)
• The 401(k) compensation limit will climb to $285,000.
• The income limits for the saver’s credit will increase to $32,500 for individuals and $65,000 for couples.

Take these 401(k) rule changes in to account when maximizing retirement savings for 2020.

401(k) Contribution Limit for 2024

The contribution limit for 401(k)s, 403(b)s, most 457 plans and the federal government’s Thrift Savings Plan will increase from $19,000 in 2023 to $19,500 in 2034.

In order to maximize your retirement contribution and your tax savings set up your automatic payroll deduction with the right amounts for 2020. If you get paid twice a months on the 15th and the end of the month you can set your 401(k) contribution per paycheck to $812.50 or $1625 if you get paid once a month in order to contribute the maximum $19,500 for the year.

If you are in the 30% tax bracket this translates to a tax savings of $5850 in 2020.

You can contribute to multiple traditional 401(k) and after-tax Roth 401(k) accounts in the same year, but your total 401(k) contributions to all accounts can’t exceed the annual 401(k) limit.

401(k) Catch-Up Contribution Limit for 2024

Workers age 50 and older are eligible to make catch-up contributions to 401(k) plans. The catch-up contribution limit will be $6,500 in 2020, up from $6,000 in 2019.

Once you cross age 50, you can contribute a full $26,000 into your employer’s 401(k) plan starting in 2020. This can certainly help offset savings deficiencies in a worker’s overall retirement planning strategy.

Tax Benefit For Maximum Contributions

Apart from saving for retirement tax savings is one of the major benefits of retirement plan contributions. Tax benefits are further boosted if you are in the higher tax brackets. Following table illustrates the tax savings at various tax brackets for maximum contributions to 401(k) plan.

If you are in the higher tax brackets and over 50 years old you can avail of significant tax savings by contributing the maximum amount to your 401(k) plan. A person aged 50 0r older can save a maximum of $9100 in taxes alone if he/she is in the 35% tax bracket. Even for someone in the lower tax bracket of 20% the savings are not insignificant with a person below 50 contributing $19,500 to their 401(k) able to save $3900 in taxes. Our advice contribute the maximum you can to your 401k.

401(k) Limit for Employer Contributions in 2024

Employers can make matching and non-matching contributions to a 401(k) plan on behalf of employees, even if the worker has already maxed out the account. The overall contribution limit to 401(k) plans, including employer and employee deposits, is 100% of the participant’s compensation or $57,000, whichever is lower. For workers age 50 and older, the overall contribution limit is $63,500, which includes catch-up contributions.

401(k) Compensation Limits for 2024

Employees that are highly compensated or with compensation over $285,000 are restricted in their ability to make 401(k) contributions. However in case of a highly compensated employee over the age of 50 he/she is allowed to make catch up contributions to the tune of $6,500 to their 401(k) accounts. So just because you are highly compensated and likely restricted from contributing to your 401(k) you might still be able to use the catch up contribution to max out your retirement savings.