401(k) Contribution Limits for 2024

For 2024, 401(k) contribution limits have gone up. The benefits of reaching the max 401(k) contributions may be more important than ever. Here’s how to plan and reach your retirement savings targets.
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Looking for a tax break in 2024?

The maximum 401(k) contributions have inched up slightly over past years and will be $23,000 for 2024. Contribution limits on other popular retirement plans have been bumped up slightly for 2024 as well.

However, since 88% of 401(k) participants contribute less than the legal maximum to their plans, chances are you still have room to get a bigger tax break in 2024.

Learn how to lighten your tax bill while building for a more comfortable retirement, including:

  • 401(k) contribution limits for 2024
  • 401(k) catch-up contributions
  • The benefits of contributing to your 401(k)
  • How to plan and reach your retirement-saving targets

401(k) Contribution Limits 2024

The 401(k) contribution limit for 2024 went up by $500 from where it was in 2023 at $22,500, for a total of $23,000.

While the 401(k) contribution limit generally increases over time, it is a mistake to assume that it will go up every year. By law, year-to-year adjustments in 401(k) contribution limits are based on inflation.

As shown in the table below, the rise in limits applies to 401(k) plans and similar plans such as 403(b) plans and 457 plans.

Contribution Limits

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401(k) Catch-up Contributions in 2024

As people get closer to retirement age, they often realize they have some catching up to do when it comes to saving for retirement. Catch-up contributions give you a chance to do that.

People aged 50 and over are eligible to make catch-up contributions. These extra contributions are applied over and above the standard contribution limits for 401(k) plans, as well as for 403(b) and 457 plans.

The catch-up contribution limit for 2024 remains the same as it was for 2023 at $7,500.

Catch-Up Contribution Limits

Since these catch-up contribution limits are applied on top of the standard limits, this means the total contribution limit differs by age, as shown in the table below.

How to Reach Retirement-Savings Targets

It may seem like such a small increase to 401(k) contribution limits for 2024 means little help in easing your tax burden and saving for retirement.

In practice, though, most people have plenty of room below the max 401(k) contribution limits to raise their 2024 retirement plan deferrals. According to Vanguard’s How America Saves study, just 15% of 401(k) participants contribute the legal maximum to their plans.

Since contribution limits aren’t the issue for most people, how can you contribute more toward reaching your retirement savings targets?

Here are some tips:

Maximize Your Employer Match

Most 401(k) plans offer employer-matching contributions. This means your employer will contribute money on your behalf based on some percentage of what you contribute. However, you only get this employer money if you contribute. Be sure to contribute enough to qualify for the maximum matching contribution your employer offers so you don’t leave any money on the table.

Bank Your Next Raise

It can be tough to find money in your household budget for retirement savings. To make it easier, boost your 401(k) deferral every time you get a raise. This way, you can save more without cutting into your current budget.

Overshoot in Good Years

Some years are worse than others financially. If your income varies, make an effort to contribute more to retirement savings in good years — even if that means kicking in more than your usual target. This will give you a cushion to make up for years when money is harder to come by.

If you’re like most people, you’re not yet taking full advantage of 401(k) contribution limits. If you make an effort to raise your deferrals this year, you can accelerate your retirement savings while easing your 2024 tax burden.

Explore the Options

Planning for retirement is a multi-year task. Some people are successful at it, and others find it bewildering. A financial advisor can help you navigate the process, but it’s still important to educate yourself on the particulars.

If you’re new to retirement planning or simply time-constrained, a financial advisor can help you understand the issues and clarify the best route to take for your situation. Some companies advise on 401(k) plans in particular.

Benefits of Making Contributions to Your 401(k) Plan

So why go to all this trouble? Why make room in your budget for 401(k) plan contributions and make the effort to adjust those contributions from year to year?

There are clear benefits to making contributions to your 401(k) plan, both now and in the future:

1. Your 401(k) contributions offer a double tax advantage. By directing pre-tax dollars from your paycheck into your 401(k), you reduce the amount of your income that will be subject to income tax next year.

2. Any investment earnings on your 401(k) contributions will also be exempt from taxes until they are withdrawn from the plan.

3. You will have to pay income taxes on the money you take out of the 401(k) in retirement. However, you may find that you are in a lower income tax bracket once you are no longer working full time.

To some extent, you can manage the timing of 401(k) withdrawals to increase tax efficiency. In fact, if you are in a very low tax bracket now and your employer’s 401(k) plan offers a Roth option, you can choose to make your 401(k) contributions taxable now rather than in the future.

4. Beyond tax benefits, the sooner you put money into your 401(k), the more years of potential investment earnings you will have between now and retirement. That could pay off in the future by making your retirement more comfortable financially. Use our retirement savings calculator to see how.

How to Plan 401(k) Contributions to Meet Retirement Goals

You can make 401(k) contributions based on current conditions, such as how much you can afford or how to maximize employer matching contributions. Another approach is to base contributions on how much money you will need in retirement.

Think of the latter as a results-oriented approach to retirement saving. You start with the amount of savings you’d like to have in retirement and then work backward to see how much you are likely to have to contribute from year to year to achieve that result.

A retirement calculator can help you figure this out. However, people often find they have difficulty affording the amount of retirement contributions calculations show they should make.

If you’re just starting your career, you may have to make smaller contributions now and then pick up the pace as your wages grow. That’s fine, but don’t leave too much of your retirement saving for later in your career.

For one thing, as wages grow, spending tends to grow as well. Ten years from now you might have a higher income, but by then saving for retirement might mean competing with other priorities like buying a house, having children, or paying off student loans.

So, determining what year-to-year retirement-account contributions to shoot for based on your long-term goals is worthwhile even if you can’t always meet those year-to-year targets. It can help you weigh your future needs against near-term spending temptations. It can also give you a clearer idea of what to expect in the future.

Other Retirement Account Limits for 2024

In addition to maintaining the same contribution limits for 401(k), 403(b), and 457 plans, the IRS announced some other notable retirement account limits for 2024:

  • The contribution limit for SIMPLE plans went up from $15,500 in 2023 to $16,000 in 2024.
  • The annual limit for contributions to both traditional and Roth IRAs was increased by $500 to $7,000 in 2024.
  • The limit on additional IRA catch-up contributions for people aged 50 or older remains $1,000 in 2024, for a total of $8,000.

These IRS limits apply to your situation, so every year you should take a fresh look at how much to contribute to your retirement savings. After all, there are no guarantees when it comes to building a retirement nest egg; but the more you put into it, the more you increase your chances of a comfortable retirement.

401(k) Frequently Asked Questions

Should I make the 401(k) asset allocation decision myself?

Use your 401(k) investment menus to allocate your new contributions and plan balance among a range of investment options ranging from aggressive stock funds to conservative cash equivalents and stable value options. The decision of how to allocate among these alternatives has a huge impact on the investment results you will get.
If you don’t feel comfortable making such a critical investment decision, see if your 401(k) plan menu offers target-date or life-cycle funds. These are options that represent a professionally managed mix of stocks, bonds, and cash, with the aggressiveness of each mix depending on the plan participant’s investment time frame.
The EBRI reports that about two-thirds of 401(k) plans now offer these options, and they are a useful tool for people who do not want to make detailed asset allocation choices themselves.
Making catch-up contributions is a great step toward building your retirement nest egg. That mission should also be helped when you allocate the money according to your needs, time frame, and comfort level with making asset-allocation decisions.

Richard Barrington, a Senior Financial Analyst at MoneyRates, brings over three decades of financial services expertise to the table. His insightful analyses and commentary have made him a sought-after voice in media, with appearances on Fox Business News, NPR, and quotes in major publications like The Wall Street Journal and The New York Times. His proficiency is further solidified by the prestigious Chartered Financial Analyst (CFA) designation, highlighting Richard’s depth of knowledge and commitment to financial excellence.
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