401(k) contribution limits have been raised for 2024. EP Wealth shares these updates to help you stay on target for striving for a solid financial future. Locate an advisor near you.
What Is the Maximum 401k Contribution for 2024?
There is good news in 2024 if you have an employer-sponsored 401(k) plan. The IRS recently raised the limits for employer-plus-employee combined contributions for the new year. Together, you and your employer can contribute a total of $69,000 in 2024, a $3,000 increase from 2023.
Employees who are age 50 or older can contribute an extra $7,500 in “catch up” funds the same calendar year, boosting their 2024 combined contribution to $76,500 ($69,000 + $7,500).
Employer Contribution Limits for SIMPLE 401(k)s
Contribution limits may vary for other types of 401(k)s. One example is a SIMPLE 401(k), which is similar to a traditional 401(k) but is used for self-employed individuals and small businesses with 100 or fewer employees. Employee contributions for these plans are capped at $16,000 for the 2024 tax year .
Simple 401(k) participants aged 50 and up can make “catch up” contributions of $3,500 for a total of $19,500. Employers must either:
- Match the employee’s contribution of 3% of their salary, OR
- Make a nonelective contribution equal to 2% of the employee’s wages.
Solo 401(k) Contribution Limits
If you’re a freelancer or independent contractor, you still have the potential to save for the future and reap the tax benefits of a traditional retirement plan. A Solo 401(k), also known as an independent 401(k), is designed for self-employed individuals.
With a Solo 401(k), you can contribute as an employee and an employer for a combined total of $69,000 in 2024. If you are 50 or older, you can make a catch-up contribution of an additional $7,500.
To be eligible to invest in a Solo 401(k) you must produce income from your own business and only employ yourself, or you and your spouse if you’re married.
Multiple 401(k) Plans
If you have access to multiple 401(k)s through different employers, you may be wondering how to determine the different contributions for each plan.
Your individual contribution limit cannot exceed the annual limit established by the IRS, regardless of how many 401(k)s you have. However, each employer can still contribute up to the maximum amount allowed per plan.
Is it Possible to Overcontribute to Your 401(k)?
Yes, you can overcontribute to your 401(k)—and incur steep penalties for doing so. It’s so important to monitor your retirement plans to avoid overpaying, as excess contributions are subject to fines up to 10%, along with income taxes on those funds.
If you participate in multiple 401(k)s or other retirement plans, your EP Wealth advisor can guide you to contribute the maximum amount possible, while staying within IRS limits. This may help you minimize a hefty bill at tax time.
Have Questions About Your 2024 Retirement Saving Plan? EP Wealth Advisors Have the Answers
There is no one-size-fits-all strategy for saving for retirement. Certain variables can impact your contributions, including your earnings total and requirements that are specific to each plan.
For clarity on your own retirement vehicles, schedule an appointment with a retirement planning advisor at EP Wealth. We provide tools and support to help you potentially build a secure financial future. Connect online to get started today.
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