As we approach the new year, it’s important to stay informed about changes that may impact retirement plans. Most recently, the Internal Revenue Service has announced significant changes to 401(k) contribution limits in 2024, allowing individuals to save even more for their future. Join us as we take a closer look at these changes and what they mean for you.
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401(k) Contribution Limits 2024
Starting in 2024, there will be an increase in the contribution limits for 401(k) plans. The annual contribution limit for these plans as well as 403(b) and 457 plans will rise from $22,500 to $23,000. This increase provides an opportunity for plan participants to save more for retirement. Furthermore, plan participants benefit from the tax benefits that come with it which sponsors also get to reap the rewards of along with greater employee retention. Additionally, it’s important for financial professionals like CFOs, accountants, and advisors to consider the maximum limits on total contributions and maximum considered compensation. These factors play a crucial role in the overall retirement planning process, allowing for effective financial management and ensuring compliance with regulations.
Catch-Up Contributions
As for catch-up contributions in 2024, employees aged 50 and older will continue be able to participate in catch-up contributions at the current limit of $7,500, allowing eligible individuals to contribute a total of $30,500 per year to their defined contribution plans.
However, there is even better news on the horizon for those hoping this amount would also increase. 2022’s SECURE 2.0 Act brings a new provision called the “super catch-up contribution,” which will come into effect in 2025. This provision will allow individuals aged 60 through 63 to contribute the greater of $10,000 or half the ordinary catch-up amount. These limits will be indexed to inflation starting in 2026, ensuring individuals can continue to take advantage of the benefits of catch-up contributions and maximize their retirement savings.
California Pensions is Here for You
Not sure how these contribution limits may affect your retirement plan? California Pension has your back! We’re focused on ensuring you can navigate your retirement plan with confidence and that your goals are met. Reach out with your retirement planning questions and don’t miss out on the opportunity to maximize your retirement plan’s full potential.
