New IRS 401k Contribution Limits for 2024: The IRS 401(k) contribution limits for 2024 have undergone important changes, and understanding these updates is crucial to maximizing your retirement savings and minimizing taxes. Whether you’re a young professional just starting to save for retirement or a seasoned worker looking to catch up on contributions, the 2024 changes offer opportunities to boost your retirement funds. This guide will walk you through these new limits, the rules surrounding catch-up contributions, and the potential benefits for retirement savers.
If you’ve been saving into a 401(k) or are considering contributing more this year, understanding the contribution limits and eligibility for tax credits is essential. Let’s explore the details of what these new changes mean for you, and how you can make the most of them.
New IRS 401k Contribution Limits for 2024
| Topic | Details |
|---|---|
| Employee Contribution Limit | $23,000 (up from $22,500 in 2023) |
| Catch-up Contribution (50+) | $7,500 (no change for those 50 and older) |
| Combined Contribution Limit | $66,000 total for employee + employer contributions |
| Roth 401(k) Contributions | Same as traditional 401(k); contributions are after-tax |
| Saver’s Credit Eligibility | Income limits for eligibility: Single – $42,000, Joint – $84,000 |
| Catch-up Contribution (Higher Earners) | Required to be Roth for individuals earning over $145,000 |
| SEP-IRA and Solo 401(k) Limits | $66,000 for self-employed individuals |
The IRS 401(k) contribution limits for 2024 present a fantastic opportunity for individuals to accelerate their retirement savings. Whether you’re contributing to a traditional 401(k), a Roth 401(k), or taking advantage of the Saver’s Credit, these changes offer more ways to save for the future
Overview of 2024 IRS 401(k) Contribution Limits
The 401(k) plan continues to be one of the most powerful retirement savings tools in the United States. It allows employees to defer taxes on a portion of their income, with the money growing tax-deferred until withdrawal. The IRS 401(k) contribution limits for 2024 allow for higher contributions than in previous years, helping you save more toward retirement. Here’s a breakdown of the main changes and limits for 2024:
Employee Contribution Limits for 2024
In 2024, the 401(k) employee contribution limit is $23,000, an increase from the $22,500 limit in 2023. This means that you can contribute an additional $500 to your 401(k) this year.
Catch-up Contributions for Those 50 and Older
For individuals aged 50 and older, there’s a catch-up contribution available to help you save more as you near retirement. In 2024, the catch-up limit remains $7,500. This means that if you’re 50 or older, you can contribute a total of $30,500 to your 401(k) for the year ($23,000 regular limit + $7,500 catch-up).
Combined Employee and Employer Contribution Limit
While employees can contribute up to $23,000 (or $30,500 with catch-up contributions), the total contribution to a 401(k) from both employees and employers (including matching contributions) cannot exceed $66,000 in 2024. For those 50 and older, this total increases to $73,500 due to catch-up contributions. It’s important to know that employer contributions count toward the total, so it’s crucial to understand the total contribution limit if you’re working with a match or profit-sharing arrangement.
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Roth 401(k) Contributions and Higher-Earners’ Catch-up Rules
The Roth 401(k) allows workers to contribute after-tax money, and withdrawals during retirement are tax-free as long as they meet certain requirements. The contribution limits for Roth 401(k) plans are the same as traditional 401(k) plans in 2024.
Roth 401(k) Catch-up Contributions for Higher Earners
Starting in 2024, a significant change applies to high earners (those with annual income exceeding $145,000 in the previous year). These individuals will be required to make their catch-up contributions on a Roth basis. This means you’ll pay taxes on your catch-up contributions now, but they will grow tax-free, and withdrawals will be tax-free in retirement.
This change only affects those with higher earnings. If you earn more than $145,000 in 2023, your catch-up contributions must go into a Roth account, which could result in a higher tax bill in the short term but provide long-term tax savings.
How to Maximize Your 401(k) Contributions in 2024
Maximizing your 401(k) contributions is one of the best strategies to prepare for a financially secure retirement. Here’s how you can take full advantage of the 2024 limits:
1. Contribute the Maximum Amount
If you’re able to, contribute the full $23,000 to your 401(k) in 2024. This will help you make the most of the tax-deferred growth potential of your retirement account. If you’re 50 or older, don’t forget to take advantage of the $7,500 catch-up contribution, bringing your total possible contribution to $30,500.
2. Utilize Employer Contributions
If your employer offers a 401(k) match, make sure you’re contributing enough to take full advantage of it. Employer contributions count toward the total contribution limit, so contributing enough to maximize your employer’s match can help you reach the total limit of $66,000 or $73,500 if you’re 50+.
3. Consider Roth 401(k) Contributions
If you anticipate being in a higher tax bracket during retirement, a Roth 401(k) could be a great choice. While you don’t get the tax deduction now, the withdrawals you make in retirement will be tax-free. This is especially beneficial if you expect tax rates to increase in the future.
4. Take Advantage of the Saver’s Credit (if eligible)
If your income is below the limits for the Saver’s Credit (e.g., $42,000 for single filers), you could qualify for a tax credit worth 10% to 50% of your 401(k) contributions. This is a fantastic way to reduce your overall tax bill and increase your retirement savings.
Other Retirement Plan Contribution Limits in 2024
In addition to the 401(k) changes, there are updated limits for other retirement accounts, including Traditional and Roth IRAs and SEP-IRAs.
1. IRA Contribution Limits for 2024
The contribution limit for Traditional and Roth IRAs remains $6,500 for 2024, with an additional $1,000 catch-up for individuals 50 and older, bringing the total limit to $7,500. IRAs provide a way to save for retirement outside of your employer-sponsored plan, so it’s worth considering if you have the opportunity to contribute.
2. SEP-IRAs and Solo 401(k) Contribution Limits
If you’re self-employed or a small business owner, you can contribute more to SEP-IRAs and Solo 401(k) plans. The contribution limit for both plans is $66,000 for 2024, an increase from $61,000 in 2023. If you’re over 50, the limit increases with catch-up contributions to $73,500.
These plans offer significant opportunities to save more if you’re self-employed.
FAQs On New IRS 401k Contribution Limits for 2024
1. What is the new 401(k) contribution limit for 2024?
The 2024 contribution limit for employees is $23,000. If you’re 50 or older, the total contribution limit is $30,500 (including the $7,500 catch-up contribution).
2. What is Roth 401(k) contributions?
Roth 401(k) contributions are made with after-tax dollars, meaning you pay taxes on the contributions now, but the money grows tax-free and withdrawals in retirement are also tax-free, provided certain conditions are met.
3. How can I maximize my 401(k) contributions in 2024?
To maximize your contributions, try to contribute the full $23,000 (or $30,500 if you’re over 50), utilize employer matching contributions, and consider contributing to a Roth 401(k) if it aligns with your long-term tax strategy.
4. What is the Saver’s Credit, and how do I qualify?
The Saver’s Credit is a tax credit available to low- and moderate-income individuals who contribute to a retirement plan like a 401(k). To qualify in 2024, your income must be below the following thresholds: $42,000 for single filers, $63,000 for heads of household, or $84,000 for married couples filing jointly.
