If your employer offers a 401(k) plan, it can be one of the easiest and most effective ways to save for your retirement. But while a major advantage of 401(k) plans is that they let you put a portion of your pay automatically into your account, there are limits to how much you may contribute.
Each year, usually in October or November, the Internal Revenue Service (IRS) reviews and sometimes adjusts the maximum contribution limits for 401(k) plans,individual retirement accounts (IRAs), and other retirement savings vehicles. In Nov. 2023, the IRS made updates for 2024.
Key Takeaways
- Employees can contribute up to $23,000 to their 401(k) plan for 2024 and $22,500 for 2023.
- Anyone age 50 or over is eligible for an additional catch-up contribution of $7,500 for both 2024 and 2023.
- The general limit on total employer and employee contributions for 2024 is $69,000 ($76,500 with catch-up).
- The general limit on total employer and employee contributions for 2023 is $66,000 ($73,500 with catch-up).
- The IRS adjusts retirement plan contribution limits annually for inflation.
Basic Limits
The basic employee contribution limit for 2024is $23,000 ($22,500 for 2023). This limit includes all elective employee salary deferrals and any contributions made to adesignated Roth accountwithin your 401(k) or a Roth 401(k) plan.If you are over age 50, the catch-up contribution remains the same as for 2023 at $7,500.That's a total of $30,500 (vs. $30,000 in 2023.)
The same contribution limits apply to 403(b) plans and most 457 plans, as well as to the federal government’s Thrift Savings Plan.
If you have multiple 401(k) accounts, your total contributions to all of them—both traditional and Roth—cannotexceedthat $23,000 limit. Any contributions you make to other types of retirement accounts, such as IRAs, do not affect your 401(k) contribution limit.
However, if you have extra funds to sock away and your company offers an after-tax 401(k) contribution option, you can contribute more. In 2024, the total combined limit, including elective employee deferrals, after-tax contributions, and employer matching funds, is $69,000 (or $76,500 if you're 50 or older). In 2023, the limit was $66,000 ($73,500 for those 50 or older).
To help workers nearing retirement add more to their tax-advantaged savings, the IRS allows 401(k) participants age 50 and over to make additional contributions beyond the standard contribution limit.
Employer Contributions
Another big benefit of participating in a 401(k) plan is that your employer may contribute to it on your behalf, as well. Many employers match employee contributions by adding, for example, 50 cents or $1 for every dollar the employee contributes.
Employers can also make elective contributions regardless of how much or little the employee contributes, up to certain limits. The limit on total employer and employee contributions for 2024 is $69,000. When you include the $7,500 catch-up contribution, that limit becomes $76,500.
The general limit on total employer and employee contributions for 2023 was $66,000 or 100% of employee compensation, whichever is less. For workers who are age 50 and up, the base limit is $73,500, which includes the $7,500 catch-up contribution.
Limits for Highly Paid Employees
If you earn a very high salary, you may be considered ahighly compensated employee(HCE), subject to more stringent contribution limits. To prevent wealthier employees from benefiting unfairly from the tax benefits of 401(k) plans, the IRS uses theactual deferral percentage (ADP) test to ensure that employees of all compensation levels participate proportionately in their companies' plans.
If non-highly compensated employees (NHCEs) do not participate in the company plan, the amount thatHCEscan contribute may be restricted.
Contributions in Excess of Annual Limits
Evaluating your estimated contributions for the year ahead and analyzing your contributions at the end of a calendar year can be very important. If you find that you have contributions in excess of the annual limits, the IRS requires excess deferrals should be returned to you by April 15.
Comparing 2024 and 2023 Limits
The chart below provides a breakdown of how the rules and limits for defined-contribution plans(401(k), 403(b), and most 457 plans)are changing for 2024 vs.2023.
| Defined Contribution Plan Limits | 2024 | 2023 | Change |
|---|---|---|---|
| Maximum employee elective deferral | $23,000 | $22,500 | +$500 |
| Employee catch-up contribution (if age 50 or older by year-end)* | $7,500 | $7,500 | +$0 |
| Defined contribution maximum limit, all sources | $69,000 | $66,000 | +$3,000 |
| Defined contribution maximum limit (if age 50 or older by year-end); maximum contribution all sources, plus catch-up | $76,500 | $73,500 | +$3,000 |
| Employee compensation limit for calculating contributions | $345,000 | $330,000 | +$15,000 |
| Key employees' compensation threshold for nondiscrimination testing | $220,000 | $215,000 | +$5,000 |
| Highly compensated employees' threshold for nondiscrimination testing | $155,000 | $150,000 | +$5,000 |
* The catch-up contribution limit for participants age 50 or older is available to those turning 50 at any time during the year. For instance, if you were born on New Year's Eve, it applies.
How Often Does the IRS Change 401(k) Contribution Limits?
The IRS typically makes an annual adjustment to contribution limits to reflect the effects of inflation on the value of money.
How Much More Can I Contribute to My 401(k) for 2024 Compared to 2023?
For the tax year 2024, the maximum amount that an employee can contribute to their 401(k) retirement plan is $23,000. That is $500 more than you are allowed to contribute in 2023.
Has the IRS Increased Catch-Up Amounts for 2024, Too?
No. The catch-up amount for those 50 years old and over remains at $7,500 for the tax year 2024, the same as 2023.
The Bottom Line
Every year, the Internal Revenue Service (IRS) issues updates for the maximum amount of money employees may contribute to their 401(k) plans. For 2024, that amount is $23,000, with a catch-up contribution of $7,500 for those aged 50 and over. For 2023, the maximum contribution amounts were $22,500 and $7,500 for catch-up contributions.
Make the most of your yearly opportunity to save toward retirement by maxing out your contribution amounts, if possible. Moreover, be sure to take advantage of employer-matching contributions, if they're offered, to boost your retirement savings each year.
