Annual Retirement Plan Limits: Understanding ASPPA 401(k) Contribution Limits

Planning for retirement is essential, and employer-sponsored plans like 401(k)s are powerful tools to help you save. However, it’s crucial to understand the annual contribution limits set for these plans. In this post, we’ll explore the 2024 contribution limits for 401(k) plans as defined by the American Society of Pension Professionals and Actuaries (ASPPA).

Understanding ASPPA and 401(k)s

The ASPPA is a leading organization dedicated to providing education and resources for retirement plan professionals. They advocate for best practices and ensure compliance with government regulations, including those for 401(k) plans.

2024 Contribution Limits

The Internal Revenue Service (IRS) sets annual contribution limits for 401(k) plans, which are followed by ASPPA. Here’s a breakdown of the 2024 limits:

• Employee Deferral Limit: For employees under 50, the maximum contribution to a 401(k) in 2024 is $23,000.
• Catch-Up Contribution: Employees aged 50 or older can contribute an additional $7,500, bringing their total contribution limit to $30,500.
• Total Contribution Limit: The combined total of employee deferrals and employer contributions cannot exceed $69,000 in 2024, or $76,500 for those aged 50 and over with catch-up contributions.

Important Considerations

• Employer Contribution Limits: The total contribution limit includes both employee deferrals and employer contributions. Therefore, the actual amount you can contribute may depend on your employer’s matching or profit-sharing program.
• Tax Implications: Contributions to traditional 401(k)s are usually made with pre-tax dollars, which reduces your taxable income for the year. Contributions to Roth 401(k)s are made with after-tax dollars, but these grow tax-free and can be withdrawn tax-free during retirement.

The IRS adjusts contribution limits for inflation periodically. It’s advisable to check the IRS website or consult with your financial advisor to stay updated on the latest limits each year.

Conclusion

Understanding the ASPPA 401(k) contribution limits is vital for maximizing your retirement savings within the allowed guidelines. By making the most of your 401(k), you can build a solid financial foundation for your future.

Additional Resources

• IRS Publication 560: Retirement Plans for Small Business (SEP, SIMPLE IRA, and Savings Incentive Match Plan for Employees of Small Employers)
• ASPPA Website

Disclaimer: This post is for informational purposes only and should not be considered financial advice. Please consult with a financial advisor for personalized retirement planning guidance.