Money is weird. One day you’re finally figuring out your budget, and the next, the IRS drops a new set of numbers that changes how much you can actually squirrel away for the future. If you’ve been coasting on your 2023 settings, you’re basically leaving money on the table. Honestly, most people just let their payroll deductions ride without a second thought, but the 401k 2024 contribution limit irs rules have moved the goalposts significantly.
The IRS bumped the employee contribution limit to $23,000 for the 2024 tax year. That is a solid $500 increase over the previous year. It might not sound like a life-changing amount, but when you factor in compound interest over twenty years, that extra five hundred bucks starts looking like a nice used car or a very long vacation in retirement.
The Basic Numbers You Need to Know
For most of us under 50, the number is simple: $23,000. That’s your personal "elective deferral" cap. This applies to 401(k) plans, 403(b) plans, most 457 plans, and the federal government’s Thrift Savings Plan.
If you are 50 or older, the IRS gives you a "catch-up" provision. For 2024, that catch-up limit stays at $7,500. This means if you’ve hit that big 5-0 milestone, your total personal contribution limit is actually $30,500.
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Total Contributions Are Much Higher
Here is where it gets interesting. The $23,000 limit is just what you put in. There is a separate, much larger limit for the "total annual additions" to your account. This includes your contributions, your employer’s match, and any profit-sharing they throw your way.
For 2024, the total limit is $69,000 (or $76,500 if you're doing the age 50+ catch-up).
Why the SECURE 2.0 Act Matters for 2024
You’ve probably heard some buzz about the SECURE 2.0 Act. It’s a massive piece of legislation that changed the retirement landscape. While many of its wildest features—like the "super catch-up" for 60-63 year olds—don't actually kick in until 2025, there are things happening now that affect your 2024 strategy.
For one, the IRA contribution limit also went up. It’s now $7,000 (plus a $1,000 catch-up for those 50+). If you're maxing out your 401(k) and still have cash burning a hole in your pocket, that’s your next stop.
The Roth Catch-Up Drama
There was supposed to be a rule starting in 2024 that forced high earners (those making over $145,000) to put their catch-up contributions into a Roth (after-tax) account. Well, the IRS realized that payroll systems across the country were nowhere near ready for that. They issued Notice 2023-62, which basically said, "Never mind, we’re pushing this back to 2026."
So, for 2024, you can still put your catch-up contributions into a traditional, tax-deferred 401(k) regardless of how much you make. This is a huge win for people in high tax brackets who want to lower their taxable income today.
Highly Compensated Employees (HCEs)
If you’re a high earner, you might run into a wall called the "nondiscrimination test." The IRS doesn't want 401(k) plans to only benefit the bosses. If not enough "rank-and-file" employees participate, the "Highly Compensated Employees" might have their contributions capped, even if they haven't hit the $23,000 limit yet.
For 2024, the threshold to be considered an HCE is $155,000 (based on your 2023 pay). If you earned more than that last year, keep a close eye on your plan’s communications. You don't want to get a "corrective distribution" check in the mail next year—that’s just taxable income you weren't expecting.
Actionable Steps to Take Today
Don't just read this and move on. Your HR portal is probably just a few clicks away.
- Check your math. If you want to hit the $23,000 max exactly, divide 23,000 by your remaining pay periods for the year.
- Don't forget the match. If your company matches 5% and you only put in 3%, you are literally throwing away free money. At the very least, hit the match.
- Review your beneficiaries. This has nothing to do with limits, but honestly, people forget this all the time. If you got married, divorced, or had a kid in the last year, update your forms.
- Assess your "Auto-Escalate." Many plans have a feature that bumps your contribution by 1% every year. Turn it on. You won't notice the 1% difference in your paycheck, but your 65-year-old self will definitely notice the difference in your balance.
If you are self-employed, the rules for a Solo 401(k) follow these same limits but allow you to act as both the employer and employee, potentially hitting that full $69,000 mark much faster. Just make sure you get your plan established and your elective deferrals documented by December 31st.
The 401k 2024 contribution limit irs update isn't just a dry administrative change. It's an opportunity. Whether you're just starting out or you're in the home stretch of your career, adjusting your contributions by even a small percentage today is the single most effective way to change your financial trajectory.
Next Steps:
- Log into your workplace retirement portal and verify your current contribution percentage.
- Calculate if your current rate will reach the $23,000 (or $30,500) limit by the end of December.
- If you are over age 50, ensure your "catch-up" election is explicitly activated, as some plans require a separate election for these additional funds.