401(k) Contribution Limits for 2024


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401k contribution limits

The IRS increases the limit to how much you can contribute to your 401(k) each year. In 2024, the IRS bumped up the maximum by $500, allowing employees to defer up to $23,000 into workplace plans, up from $22,5000 in 2023.

Knowing the maximum 401(k) contribution for 2024 can save you from paying taxes twice. If you go beyond limits set by the IRS, you’ll pay income tax on the excess contributions now and again when you withdraw money from the retirement account. Learn how the contribution limits work and how much you can sock away in a 401(k) plan in 2024.

401(k) Contribution Limits for 2024

You can save more money in 2024 than ever before: Investors who want to max out their retirement savings can add another $500 to their plans, according to the Internal Revenue Service’s latest adjustment. While this jump is a welcome change for those hoping to pad their retirement accounts, it’s much less than the bump awarded by the government in 2023, when 401(k) construction maximums rose $2,000. 

Here are the latest contribution maximums for your 401(k) retirement plans.

  • The 2024 employee contribution limit is $23,000, up from 22,500 in 2023.
  • For those 50 and older, the catch-up contribution limit remains unchanged at $7,500. This means you can contribute up to $30,500 if you’re 50 and older.

The same contribution limits apply to 403(b) plans, Thrift Savings Plans and most 457 plans.

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401(k) Income Limits for 2024

Earnings up to $345,000 are eligible for 401(k) contributions in 2024. However, this doesn’t mean that anyone making more than that amount can’t contribute to a plan, it simply means that any compensation above that amount is ineligible for contribution. 

For example, if you earn $400,000 and your employer offers a 5% match, you can contribute $23,000 in 2024. However, your employer will only match $17,250 (5% of $345,000), not $20,000 (5% of $400,000).

401(k) Plan LimitDescription20242023
Employee ContributionMaximum total annual contributions$23,000$22,500
Total ContributionEmployee and employer contributions combined$69,000$66,000
Catch-up DeferralsAdditional contribution amount for those over age 50$7,500$7,500
Total Contribution for 50+Total contribution limit, plus catch-up contribution$76,500$73,500
Income LimitRules depend on the 401(k) plan$345,000$330,000
401(k) Limits 2024

401(k) Retirement Savings for Older Investors

If you’re at least 50 years old, you can make “catch-up” contributions by adding an extra $7,500 into your account, for a total contribution of $30,500 in 2024. The total maximum you can put away in your 401(k) plan in 2024, including employer contributions, is $76,500—$7,500 more than the $69,000 maximum allowed for everyone else. 

Employers often provide a matching contribution, which is essentially free money. However, most companies will only contribute to your plan if you commit to also saving the minimum amount to get the match.

From Our RICP® & CES™

“It’s important to understand your employer’s 401(k) match formula, as they vary widely. A typical employer match is $1 for every $1 an employee contributes, up to 3% of their salary, then 50 cents on the dollar for the next 2% of their salary. This arrangement encourages employees to contribute at least 5% of their salary to fully leverage the employer match. ”

Traditional 401(k) vs Roth 401(k)

If you opt for a traditional 401(k) plan, your contributions are “deferred,” meaning they are pre-taxed and not included in your taxable earnings each year. For example, if you earn $100,000 a year and contribute the maximum $23,000 to your 401(k) in 2024, your taxable earnings would be $77,000 (assuming no other deductions). 

However, if you opt for a Roth IRA, you won’t get the same upfront tax break. Instead, you won’t owe tax on it when you withdraw that money in retirement—all your retirement savings come out tax free. 

Some investors choose to contribute to both types of 401(k) plans to help diversify their portfolios and taxes. Just ensure your total contributions to both don’t exceed the annual limit.  

If your employer offers an “after-tax plan,” you can contribute to that as well, allowing you to save up to the total annual limit of $69,000.

What If I Go Over the 401(k) Contribution Limit?

A change in income or contributing to more than one plan can create an excess deferral. Going over the max 401(k) contribution limits happens when contributions total more than the amount allowed for 2024.

  • If you go over the maximum 401(k) limits, notify your plan administrator before April 15 of the year after the overcontribution is made. Ask for a distribution from the plan of the excess deferral adjusted for earnings.
  • The distribution is included in your 2024 gross income for tax purposes. File an amended tax return if you file your taxes before requesting the distribution.
  • While the earnings are taxed, you won’t owe the additional 10% tax on early distributions. You will receive Form 1099-R from the plan for tax reporting.

If you leave the excess funds in the plan, the amount is excluded from your cost basis when you take 401(k) distributions after retirement. You get taxed on the excess deferral left in the 401(k) when you contribute and again when you take a distribution. Speak to a financial advisor if you don’t fully understand how to avoid creating an excess deferral.

Pro tip: If your company offers auto-enrollment, make sure you understand how its existing parameters will affect your ability to save for retirement, Christopher advises. “The average default contribution rate was 4.1% in Q2 2023, and that’s not a lot. It’s like setting the cruise control, but at a speed that won’t get you to your destination on time. Your contributions may go up each year, but not at the rate you were expecting.”

IRA Contribution Limits 2024

The IRS also boosted contribution limits for IRAs, allowing investors to save $7,000 in 2024, up from $6,500 in 2023. Catch-up contributions for those 50 and older will remain unchanged at $1,000.

More Americans may also qualify for Roth IRA contributions in 2024, as the adjusted gross income phaseout range rises pretty significantly to between $146,000 and $161,000 for single individuals and heads of households.

Bottom Line

It’s tough to live comfortably on Social Security benefits alone. If your employer offers a 401(k) plan, take advantage of the tax benefits combined with future retirement income. Start with a small contribution if you’re on a tight budget. Know the annual limits on elected deferrals, and plan early to maximize your 401(k) savings in 2024.

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