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401(k) Contribution Limits for 2024

Last updated 03/19/2024 by

Julie Bawden-Davis
Most financial experts readily agree that when it comes to saving for retirement, your best bet is an employer-sponsored 401(k).
If you have the opportunity to save for retirement with a 401(k) and your employer has a matching program, jump on the chance, says Doug Carey, a retirement expert and president of WealthTrace, which provides financial planning software for consumers. “Contributing to a 401(k) plan when an employer matches contributions is still the single best way to save for retirement.”
Employer matching programs, in which companies contribute a percentage of what employees do to 401(k) accounts, are optional. According to the 401(k) Help Center, the most common type of match provided by employers in 2015 was 50 cents for each dollar up to a specified percentage of pay, which was commonly 6%.
As you make plans and adjustments to your retirement savings plan for the year, it’s a good idea to take a look at 401(k) contribution limits for 2020.

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2020 401(k) employee contribution limits

As tax-advantage accounts, 401(k) retirement plans have a maximum annual employee contribution set by the IRS every year. This maximum contribution is the cap on how much you can contribute to these accounts over the year.
An employee can contribute up to $19,500 in 2020, up from $19,000 in 2019. If the individual is age 50 or older, he or she can contribute additional “catch-up” contributions of up to $6,500, which brings the contribution limit to $26,000 for the year.

Roth vs. traditional 401(k)

There are two types of 401(k) accounts, Roth and traditional. The contribution limits for both types of accounts are the same.
Roth plans allow you to pay tax on retirement savings now, so you don’t have to pay any tax when you retire and withdraw the money. These plans also allow you to withdraw funds that you’ve contributed to the account without penalties.
There are income limits associated with Roth IRAs. The chart below from the IRS details what those are for 2020. This table shows whether your contribution to a Roth IRA is affected by the amount of your modified AGI as computed for Roth IRA purpose.
If your filing status is…And your modified AGI is…Then you can contribute…
Married filing jointly or qualifying widow(er)< $196,000up to the limit
> $196,000 but < $206,000a reduced amount
> $206,000zero
Married filing separately and you lived with your spouse at any time during the year< $10,000a reduced amount
> $10,000zero
Single, head of household, or married filing separately and you did not live with your spouse at any time during the year< $124,000up to the limit
> $124,000 but < $139,000a reduced amount
> $139,000zero
Some 401(k) plans allow for hardship distributions from a traditional IRA, which means that there wouldn’t be a penalty. To be eligible for a hardship distribution, you must show an “immediate and heavy financial need,” according to the IRS. Some eligible reasons include certain medical expenses, payments to prevent eviction from your primary residence, burial and funeral expenses, repairs for certain damage to the home and possibly the costs associated with purchasing a principal residence.Traditional plans give you tax savings now, but you have to pay Uncle Sam later when you withdraw the money. There is also a 10% penalty if you withdraw any money from this type of retirement plan before age 59½.

Contribute enough to earn the employer match

Do your best to contribute enough money to your 401(k) plan to ensure that you get matching contributions from your employer. Most employers provide a match of 50% to 100% of employee contributions, as long as you contribute at least 6% of your salary each year. Employer contributions add up over time.

When to consider an individual IRA

There are several reasons why you might want to consider also opening an individual Roth or traditional IRA once you’ve gotten all of your employer match funds. 401(k) plans tend to feature various costs that can eat away at your investments. According to the Department of Labor, 401(k) fees include administration fees for the operation of the plan, investment fees and individual service fees.
Individual Roth and traditional IRAs don’t have as many fees, and you have greater control over the fees you do pay. With an individual IRA, you have a wider variety of investment options, including low-cost index funds or ETFS, such as those offered through USAA and TD Ameritrade. Such funds are “passively managed,” which means they usually feature lower management fees. They’re a good choice because they’re known for performing well over time.

IRA contribution limits

IRAs also have annual contribution limits. For 2020, you can contribute $6,000. If you are 50 or older, the annual contribution limit is $7,000,
Planning your retirement savings is an important process that requires some planning. To help you with that planning and in choosing the right money management company, check out SuperMoney’s Wealth Management and Brokerage Reviews page.o

Julie Bawden-Davis

Julie Bawden-Davis is a widely published journalist specializing in personal finance and small business. She has written 10 books and more than 2,500 articles for a wide variety of national and international publications, including, where she has a weekly column. In addition to contributing to SuperMoney, her work has appeared in publications such as American Express OPEN Forum, The Hartford and Forbes.

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