2024 401(k) Contribution Limits
| Who | 2024 Limit |
|---|---|
| Employee contribution (under 50) | $23,000 |
| Catch-up contribution (age 50+) | +$7,500 |
| Total employee limit (50+) | $30,500 |
| Combined employee + employer limit | $69,000 |
Employer Match: Free Money
Many employers match 50%–100% of your contributions up to a percentage of your salary. This is an immediate 50%–100% return on your investment — always contribute at least enough to get the full match.
Your employer matches 50% of contributions up to 6% of salary. You earn $60,000/year. If you contribute 6% ($3,600), your employer adds $1,800/year — completely free. That's $150/month you'd forfeit by not contributing.
Traditional vs. Roth 401(k)
- Contributions: Pre-tax (reduces taxable income now)
- Growth: Tax-deferred
- Withdrawals: Taxed as ordinary income
- Required Minimum Distributions: Yes, starting at age 73
- Best for: Higher earners expecting lower tax rate in retirement
- Contributions: After-tax (no immediate tax break)
- Growth: Tax-free
- Withdrawals: Tax-free in retirement
- Required Minimum Distributions: No RMDs starting 2024
- Best for: Younger workers or those expecting higher taxes in retirement
General guideline: Choose Traditional if you're in a high tax bracket now and expect a lower rate in retirement. Choose Roth if you're early in your career, expect income to grow, or want tax-free flexibility in retirement.
Many plans allow splitting contributions between both. You can also contribute to both a 401(k) and an IRA in the same year.
Vesting: When Employer Contributions Become Yours
Your own contributions are always 100% yours. Employer matching contributions vest on a schedule:
- Immediate vesting: Employer match is yours from day one
- Cliff vesting: 0% until a date (e.g., year 3), then 100%
- Graded vesting: Gradual (e.g., 20%/year over 5 years)
Withdrawing from a 401(k) before age 59½ triggers a 10% penalty plus income tax on the amount withdrawn. Exceptions exist for disability, certain medical expenses, and a few other situations.