Puede ahorrar más en su 401(k) en 2024

Bulk up your 401(k) next year and take advantage of long-term gains after a year of economic bumpiness and inflation. The IRS announced 401(k) annual contribution limit increases for 2024 for employees who have access to such a plan. Esto incluye:

• The amount individuals can contribute to 401(k), 403(b) and other tax-advantaged employer savings plans will increase to $23,000—up from $22,500 in 2023.
• People 50 and older can make catch-up contributions of $7,500 beginning the calendar year they turn 50. This stays the same as 2023.
• For participants in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan who are 50 and older, the max contribution increases from $30,000 to $30,500.

"The contribution increase is a reflection of the high inflation rates we've seen the past few years," said Brandy Marion, retirement plans education manager at BOK Financial^®.

Inflation was high much of 2023 peaking at 6% in February to eventually dropping to 3.2% in October as a result of the Fed's steady increase in interest rates.  The IRS will also increase tax brackets for 2024 by 5.4%.

The 401(k) increases also come on the heels of a cost-of-living-adjustment (COLA) increase of 3.2% for Social Security beneficiaries.

"Contributing to your 401(k) helps prepare you for retirement and provides tax advantages in the long run," Marion said. "It's important to check in on your account periodically and be attuned to this type of change to be sure you're taking advantage of every opportunity you can."

Free money

If you're not already contributing to a 401(k), now is the time to investigate taking advantage of the long-term benefits, Marion said. "Incluso si no está maximizando sus contribuciones, si su empleador ofrece igualar un porcentaje, debe contribuir lo suficiente para ganar la igualación. Al no aprovechar este beneficio, te estás perdiendo 'dinero gratis'".

Increasing your 401(k) contributions will also reduce your taxable income. "The more you increase contributions from your pre-tax income, the less you'll be taxed on the remainder," Marion said. If your pre-tax paycheck is $2,000 and you allocate 10% to your 401(k), you'll only be taxed on $1,800. Even a 1% increase in your contribution rate can make a difference in the long run, she said.

Bottom line, says Marion: Review your 401(k) contributions regularly. "Now is the time to go in and see how much you're contributing and make changes based on your needs going into the new year," she said, adding a few other tips:

• The increase from the IRS doesn't include employer matching. "It's important to note that the increase is only for the employee contribution portion, so an employer match can go above that amount," Marion said.
• Are you retiring in the next 10 years? Then you might need to revisit your selections.
• Avoid front-loading your contributions. In most situations, employee matching is done per pay period, so front loading your contributions may mean you're not eligible for employee matching—and this could mean missing out on a lot of "free money" throughout the year to help grow your retirement account.