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Understanding 401(k) Contribution Limits for 2024

Planning for retirement is crucial, and understanding the limits on your 401(k) contributions can help you maximize your savings. At O1ne Mortgage, we are here to assist you with all your mortgage needs. Call us at 213-732-3074 for expert advice.

Does Your 401(k) Contribution Limit Include Employer Matches?

Employer matching contributions are a great way to boost your retirement savings. Fortunately, these matches do not count towards your annual 401(k) contribution limit for elective deferrals. In 2024, you can contribute up to $23,000 of your wages to your 401(k), regardless of how much your employer contributes.

How 401(k) Contribution Limits Work

Understanding how the IRS defines contribution limits can help you plan better. Here’s a breakdown:

Elective Deferrals for 401(k) Accounts

The IRS limits the amount of your wages you can set aside in a 401(k). For 2024, the elective deferral limit is $23,000, excluding employer matching contributions.

Catch-Up Contributions

If you are 50 or older, you can make additional catch-up contributions of $7,500 in 2024, allowing you to save more as you approach retirement.

Combined Employee and Employer Contributions

The total combined contributions from both you and your employer cannot exceed $69,000 in 2024 ($76,500 if you are 50 or older). This includes elective deferrals, employer matching, and other employer contributions.

Limits for Highly Compensated Employees

For highly compensated employees, the IRS limits the amount of compensation that can be used to calculate employer matches. In 2024, only up to $345,000 of your salary can be considered for matching contributions.

What if You Contribute Too Much?

If you exceed the contribution limits, you must withdraw the excess funds and any earnings as soon as possible. Correcting this before April 15 of the following year can help you avoid penalties. If you suspect an over-contribution, contact your plan administrator immediately.

2024 401(k) Contribution Limits

Here are the key 401(k) contribution limits for 2024:

• Elective deferrals: $23,000
• Catch-up contributions (50 and older): $7,500
• Combined employee and employer contributions: $69,000
• Compensation limit: $345,000

The Bottom Line

In summary, you can contribute up to $23,000 to your 401(k) in 2024, with additional contributions allowed if you are 50 or older. Employer matches do not count towards this limit, but the total combined contributions cannot exceed $69,000. For highly compensated employees, the compensation limit for calculating matches is $345,000.

For any mortgage service needs, reach out to O1ne Mortgage at 213-732-3074. We are here to help you achieve your financial goals.

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