With the start of the year 2024, you have a new opportunity to save money for retirement. The IRS has announced new 401(k) contribution limits for 2024, and knowing these limits will allow you to plan your retirement savings better.

The IRS sets annual contribution limits for retirement plans, which can change to adjust for inflation. In 2024, the 401(k) and IRA maximum limits have increased, which means you can put aside more money for a comfortable retirement this year.

What are 401(k) Contribution Limits?

The IRS sets an annual contribution limit for retirement savings plans. These limits determine how much you and your employer can contribute to the retirement plan in any given year. These limits are annually evaluated to adjust for factors like cost of living and inflation.

The IRS also has compensation limits to ensure fairness so those earning a higher income don’t benefit more than those with a modest salary.

401(k) Contribution Limits for 2024

The 401(k) contribution limits for 2024 are:

  • Employee contributions: $23,000
  • Combined employee and employer contributions: $69,000

Depending on the plan, you may also be able to make extra post-tax contributions. However, your total contributions cannot be more than your annual salary at the company where you have your 401(k) plan.

Roth 401(k) Contribution Limits for 2024

The contribution limit for Roth 401(k) accounts is the same as a traditional 401(k) account: $23,000 for employee contributions and $69,000 for combined employer and employee contributions.

The same contribution limits also apply to the federal government’s Thrift Savings Plan, which has most 457 plans and 403(b) plans. If you have multiple accounts, your total contributions to Roth and traditional accounts cannot exceed the $23,000 basic contribution limit.

Changes to 401(k) Contribution Limits in 2024

The 401(k) contribution limits in 2024 have increased compared to 2023. In 2023, the contribution limit for employee contributions was $22,500 and $66,000 for combined employer and employee contributions.

The catch-up contribution limit for those who are 50 or older remains the same at $7,500.

401(k) and Roth Contribution LimitsEmployee ContributionsEmployer and Employee ContributionsCatch-Up Contributions

Catch-up Contributions for Individuals Over 50

Catch-up contribution allows those who are aged 50 or older to make extra contributions to their 401(k) and individual retirement accounts (IRA). This means that other than the annual contribution limit set by the IRS, you can contribute an additional amount to your retirement plan.

Catch-up contributions can be a helpful strategy for financial stability during retirement. If you’ve not been able to max out your 401(k) during your working life, you can take advantage of catch-up contributions to save more and benefit from tax advantages.  

401(k) Contribution Limits for Individuals Over 50 in 2024

If you’re over the age of 50 in 2024, you can contribute an additional $7,500 to your 401(k) as a catch-up contribution. This means that you can contribute a total of $30,000 in 2024.

Roth 401(k) Contribution Limits for Individuals Over 50 in 2024

The catch-up contribution limit for Roth 401(k) accounts is the same at $7,500 in 2024. If you have a traditional 401(k) and a Roth 401(k), you can contribute up to the annual contribution and catch-up limits across both.  

401(k) Contribution Limits 2024 for Multiple Plans at Different Employers

If you have more than one 401(k) plan with different employers, you’ll still need to follow the maximum total 401(k) contribution limits for 2024.

This means that if you have two retirement accounts, you can split the maximum contribution limit of $23,000 between the two.  

After-Tax 401(k) Contribution Limits for 2024

If you’ve already contributed up to the maximum limit to your 401(k) as an employee, you may be able to save more through after-tax contributions. Keep in mind that while you’ll be able to save more, you may have to pay taxes again when you withdraw the funds in retirement.

Not all plans allow after-tax contributions. If your employer offers this option, the total combined limit, including employee deferrals, employer contributions, and after-tax contributions, is $69,000 in 2024.

Those who earn high salaries are categorized as highly compensated employees (HCE) and are subject to stricter contribution limits.

The IRS uses the actual deferral percentage (ADP) test for eligibility to prevent highly paid employees from getting unfair tax advantages from 401(k) plans. In 2024, a highly compensated employee is someone who earns more than $150,000.

Highly compensated employees may face restrictions on how much they can contribute to their 401(k)s. For example, the IRS limits the income on which an employer can offer a contribution match to such employees, which is $345,000 in 2024.

Regardless of your income, the maximum 401(k) contribution limits for 2024 will also apply. This means that the maximum amount you contribute to your 401(k) plan from all sources cannot exceed $69,000 in 2024. We recommend speaking to a tax or financial consultant if you’re a highly compensated employee.

What Happens When You Make Excess Contributions?

You may have to pay a 10% fine and income taxes on any excess contributions you make to your 401(k).

In most cases, 401(k) plans have safeguards in place to prevent excess contributions. However, you may accidentally contribute too much if you have multiple plans or if you change jobs.

Excess contributions and any earnings on them are considered taxable unless you take them out by April 15. You must also report them on Form 1099-R when you file taxes.

Understand the 401(k) Contribution Limits for 2024 to Maximize Your Savings

The Internal Revenue Service (IRS) updates the maximum contribution limit for 401(k) plans every year.

The 401(k) contribution limits for 2024 are $23,000 for basic contributions and $7,500 for catch-up contributions for those 50 and older.

Take advantage of employer matching, avoid taking out 401(k) loans or early withdrawals, and max out your contribution when possible to maximize your retirement savings. We also recommend speaking to a financial advisor on how to plan retirement financial planning.