Key Takeaways
- 401(k)-contribution limits are set by the IRS to state how much money an individual and employer are allowed to put into their 401(k) savings account.
- The total contribution limit in 2024 is $69,000. This includes both employee contributions and employer contributions combined.
- The 401(k)-employee contribution limit in 2024 is $23,000.
- A catch-up contribution is a type of retirement contribution that allows those 50 years old or older to make additional contributions to their 401(k) account. This is to help individuals who are closer to retirement age save more for their future.
- If you're over the age of 50, you can make an annual "catch-up" contribution of $7,500. This increases the total contribution limit to $76,500.
- Solo 401k plans users have more flexibility in determining the total amount to contribute each year as they are both the employer and employee.
What is a 401(k) Contribution Limit?
A 401(k)-contribution limit is set by the IRS to state on how much an individual and employer are allowed to put into an employee’s 401(k) savings account. These limits are set to account for inflation, cost of living, and other factors. For 2024 the contribution limit is $23,000 for an employee, and an employer contribution can bring the total contribution up to $69,000.
What is a Catch-up Contribution Limit?
A catch-up contribution is a type of retirement contribution that allows those 50 or older to make additional contributions to their 401(k) plan. If you're 50 or older, you're allowed to make an annual "catch-up" contribution of $7,500 on top of the annual allowed limit. This is to help individuals who are closer to retirement age save more for their future.
2023 vs 2024 Contribution Limits
| 401(k) Limits for 2024 | ||
|---|---|---|
| 2024 | 2023 | |
| Employee contribution limit | $23,000 | $22,500 |
| Annual limit per individual | $69,000 | $6,000 |
| Age 50+ catch-up amount | $7,500 | $7,500 |
| Annual compensation limit | $345,000 | $330,000 |
| Highly compensated employees | $155,000 | $150,000 |
401(k) employee contribution limits increase in 2024 to $23,000 from $22,500 in 2023. Those over 50 years of age can make additional catch-up contributions of $7,500 per year (that's up to $30,500 per year in total before any employer match) to their 401(k) accounts.
Most 401(k) plans allow Roth 401(k) contributions. Employees may choose to put some, none, or all contributions into the Roth 401(k) or Traditional tax-deferred option. Do know that all employer matches or contributions must be provided on a tax-deferred basis. Separately, IRA limits remain the same as last year.
Solo 401(k) Contribution Limits 2024
A solo 401(k), also known as an Individual 401(k), is a retirement plan for self-employed business owners and their spouses. This type of retirement plan allows you to contribute to the plan as both the employer and employee, providing you with the ability to maximize contributions and business deductions while lowering your personal taxes.
Like other 401(k) plan types, those with a Solo 401(k), the annual contribution limit per individual is $69,000. However, as the owner is both the employer and employee, it can be simpler to manage how much you choose to contribute in each role.
Solo 401(k) Contribution Limits vs IRA Contribution Limits
| 401(k) | IRA | |
|---|---|---|
| Annual limit per individual | $69,000 (employee + employer contributions) |
$7,000 |
| Age 50+ catch-up amount | $7,500 | $1,000 |
| Roth income limit | None | $161K* |
| Penalty-free access, if needed | Yes, via a loan | No |
*Beginning at $146K, the amount you are allowed to contribute begins to decrease, hitting $0 at $161K for singles (range is $230K to $240K for married couples filing jointly)
Here are a few more resources that you may find helpful:
•2024 401(k) Max Contribution Limits and More
• 401(k) Savings Advantages
• 401(k) Advantages over SEP and SIMPLE IRAs
If you need help or have questions, just give us a ring at 1-800-431-7934.