401(k) Limits

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Calvin-Snoopy
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401(k) Limits

Post by Calvin-Snoopy »

According to the IRS website:
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan remains $7,500 for 2024. Therefore, 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 can contribute up to $30,500, starting in 2024.
It does not mention an employer match. So if I'm making $65k/year, I can set up my withdrawal from each paycheck to be whatever percentage makes it come out to be a contribution of $30,500? I don't know if I would actually be practicably able to put 50% of each paycheck toward retirement, but it's possible, right?

Thanks!
toddthebod
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Re: 401(k) Limits

Post by toddthebod »

Calvin-Snoopy wrote: Tue Apr 02, 2024 6:05 pm According to the IRS website:
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan remains $7,500 for 2024. Therefore, 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 can contribute up to $30,500, starting in 2024.
It does not mention an employer match. So if I'm making $65k/year, I can set up my withdrawal from each paycheck to be whatever percentage makes it come out to be a contribution of $30,500? I don't know if I would actually be practicably able to put 50% of each paycheck toward retirement, but it's possible, right?

Thanks!
Yes.
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FiveK
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Re: 401(k) Limits

Post by FiveK »

Calvin-Snoopy, welcome to the forum.
So if I'm making $65k/year, I can set up my withdrawal from each paycheck to be whatever percentage makes it come out to be a contribution of $30,500?
Yes.
sailaway
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Re: 401(k) Limits

Post by sailaway »

Calvin-Snoopy wrote: Tue Apr 02, 2024 6:05 pm According to the IRS website:
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan remains $7,500 for 2024. Therefore, 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 can contribute up to $30,500, starting in 2024.
It does not mention an employer match. So if I'm making $65k/year, I can set up my withdrawal from each paycheck to be whatever percentage makes it come out to be a contribution of $30,500? I don't know if I would actually be practicably able to put 50% of each paycheck toward retirement, but it's possible, right?

Thanks!
Yes, this limit is for salary deferral. There is a much higher limit to leave room for employer match, profit sharing or after tax contributions, depending on what the plan allows.
Topic Author
Calvin-Snoopy
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Re: 401(k) Limits

Post by Calvin-Snoopy »

Thank you!
sailaway
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Re: 401(k) Limits

Post by sailaway »

Calvin-Snoopy wrote: Tue Apr 02, 2024 7:20 pm Thank you!
Oh, other caveats. Your plan has to allow the high percentage of deferral and if you are classified as a highly compensated employee, they may return some of your contributions next year.
mikejuss
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Re: 401(k) Limits

Post by mikejuss »

Calvin-Snoopy wrote: Tue Apr 02, 2024 6:05 pm I don't know if I would actually be practicably able to put 50% of each paycheck toward retirement, but it's possible, right?
Yes. The contribution limit to the 401(k) plan at my current employer is 75% of each paycheck (up to the current federal limit of $23,000).
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Topic Author
Calvin-Snoopy
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Re: 401(k) Limits

Post by Calvin-Snoopy »

Thank you @sailaway for the additional info. I suspect that my $65,000 annual salary isn't considered "high compensation." :D
terran
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Re: 401(k) Limits

Post by terran »

As others have said, the $23,000 plus $7500 catch up limit only applies to your contributions. There's also an overall $69,000 limit that applies to all contributions (the catchup contribution might not be included, I'm not sure) including employer contribution.
otinkyad
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Re: 401(k) Limits

Post by otinkyad »

Calvin-Snoopy wrote: Tue Apr 02, 2024 7:37 pm Thank you @sailaway for the additional info. I suspect that my $65,000 annual salary isn't considered "high compensation." :D
The IRS limits and your plan limits may not be the same. I’ve seen a 401(k) plan that limited employee contributions to 15% of their salary, and 25% is not rare. You don’t have to be an HCE to run afoul of plan limits.
placeholder
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Re: 401(k) Limits

Post by placeholder »

My last years at megacorp it was limited to 30% which was a bit of pain because the plan had aftertax contributions that could be used for mega backdoor roth but I was never able to max that out.
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cosmos
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Re: 401(k) Limits

Post by cosmos »

Calvin-Snoopy wrote: Tue Apr 02, 2024 6:05 pm According to the IRS website:
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan remains $7,500 for 2024. Therefore, 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 can contribute up to $30,500, starting in 2024.
It does not mention an employer match. So if I'm making $65k/year, I can set up my withdrawal from each paycheck to be whatever percentage makes it come out to be a contribution of $30,500? I don't know if I would actually be practicably able to put 50% of each paycheck toward retirement, but it's possible, right?

Thanks!
It depends on the 401k provider in some cases. I qualify for catch-up but I had to readjust my percentages in the 401k plan site. I cannot just up the main percentage so I elect a base percentage as always and then add additonal percentage to the catch-ups. It all goes to the same place but i belive there is some backend accounting going on here.

The year I turned 50 it sent me a notice when I logged into the plan site saying congratulations your eligible for catch-up contributions then an additional dialog box comes up when opt-in with another percentage of contributions. I had to do the math and found a percentage just under the main 401k yearly limit and another percentage that did not exceed the 7500 annually in catch-ups to total 30,500.
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BorqaZ
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Re: 401(k) Limits

Post by BorqaZ »

Calvin-Snoopy wrote: Tue Apr 02, 2024 6:05 pm According to the IRS website:
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan remains $7,500 for 2024. Therefore, 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 can contribute up to $30,500, starting in 2024.
It does not mention an employer match. So if I'm making $65k/year, I can set up my withdrawal from each paycheck to be whatever percentage makes it come out to be a contribution of $30,500? I don't know if I would actually be practicably able to put 50% of each paycheck toward retirement, but it's possible, right?

Thanks!
You can do whatever you want as long as you don't exceed $30.5k by year end in EACH of those accounts.
exodusNH
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Re: 401(k) Limits

Post by exodusNH »

BorqaZ wrote: Tue Apr 02, 2024 10:25 pm
Calvin-Snoopy wrote: Tue Apr 02, 2024 6:05 pm According to the IRS website:
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan remains $7,500 for 2024. Therefore, 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 can contribute up to $30,500, starting in 2024.
It does not mention an employer match. So if I'm making $65k/year, I can set up my withdrawal from each paycheck to be whatever percentage makes it come out to be a contribution of $30,500? I don't know if I would actually be practicably able to put 50% of each paycheck toward retirement, but it's possible, right?

Thanks!
You can do whatever you want as long as you don't exceed $30.5k by year end in EACH of those accounts.
Plans can have limits below the IRS' limits.

Plans can also limit the percentage of each paycheck that can go into your 401k.
AlaskaTeach
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Re: 401(k) Limits

Post by AlaskaTeach »

...and for IRA limits, here is info. I found for 2025...

"Taxpayers with traditional IRAs are no longer required to make withdrawals from their account at age 73 and reduces the penalty for not taking required withdrawals. Beginning in 2025, the annual total contribution limits to an IRA will be raised to $10,000 for taxpayers between the ages of 60 and 63.Sep 20, 2023"

for 401k....

"Starting in 2025, catch-up contribution limits for retirement plans such as 401(k)s will increase from $7,500 per year to $10,000. The limit will be indexed for inflation."

Looks to me that I can get my salary down to almost nothing... $10,000 for an IRA and $33,500 for a 401k or 457b.

so, take a 72k teacher salary..first reduce the salary because of medicare and contribution to retirement plan...estimate 72k X .89 = ~64k

Then reduce salary for health insurance pre-tax, HDHP of about $1200, and then HSA pre-tax of about $5250. 64k - 5.250 - 1.2 - 10k - 33.5 = $14050.

Now all I need is for my wife to get about a 50% raise to pay some bills. :D

(I guess I could qualify for the elusive savers tax credit?
placeholder
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Re: 401(k) Limits

Post by placeholder »

BorqaZ wrote: Tue Apr 02, 2024 10:25 pm
Calvin-Snoopy wrote: Tue Apr 02, 2024 6:05 pm According to the IRS website:
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan remains $7,500 for 2024. Therefore, 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 can contribute up to $30,500, starting in 2024.
It does not mention an employer match. So if I'm making $65k/year, I can set up my withdrawal from each paycheck to be whatever percentage makes it come out to be a contribution of $30,500?
You can do whatever you want as long as you don't exceed $30.5k by year end in EACH of those accounts.
No the 457 has a separate deferral limit but 401k and 403b along with other plans like tsp share a limit that is across all accounts.
AlaskaTeach
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Re: 401(k) Limits

Post by AlaskaTeach »

AlaskaTeach wrote: Tue Apr 02, 2024 11:55 pm ...and for IRA limits, here is info. I found for 2025...

"Taxpayers with traditional IRAs are no longer required to make withdrawals from their account at age 73 and reduces the penalty for not taking required withdrawals. Beginning in 2025, the annual total contribution limits to an IRA will be raised to $10,000 for taxpayers between the ages of 60 and 63.Sep 20, 2023"

for 401k....

"Starting in 2025, catch-up contribution limits for retirement plans such as 401(k)s will increase from $7,500 per year to $10,000. The limit will be indexed for inflation."

Looks to me that I can get my salary down to almost nothing... $10,000 for an IRA and $33,500 for a 401k or 457b.

so, take a 72k teacher salary..first reduce the salary because of medicare and contribution to retirement plan...estimate 72k X .89 = ~64k

Then reduce salary for health insurance pre-tax, HDHP of about $1200, and then HSA pre-tax of about $5250. 64k - 5.250 - 1.2 - 10k - 33.5 = $14050.

Now all I need is for my wife to get about a 50% raise to pay some bills. :D

(I guess I could qualify for the elusive savers tax credit?


Instead of thinking about the savers credit I just realized this would be a golden opportunity to do some Roth conversions on my tax-deferred accounts. Many years ago my wife and I had a large amount of tax credits - about $5000, so I converted her IRA to a Roth at the crazy low tax bracket of 0%. I could almost duplicate that feat??? I could convert to the top of the 12% bracket, which appears to be $94000 for MFJ. Does this make sense?

Looking long-term I also figured out a way to lower my income in retirement. If my pension is scheduled to be about $45000, I could opt for a PLSO (partial lump sum option) that would throw 3 years worth of pension income to my IRA, and my annual pension would be reduced to about 74% of the $45000 figure ~ $33300.

It is possible that depending upon low SS our income could be my pension of 33.3k, her pension from a previous employer of 6.0, her SS of 18k, and later on my SS of 8k. Total would be about 66k, before deductions such as over 65 standard, medicare parts, so is it possible we might actually stay in the 12% bracket for the foreseeable future. If so, maybe I don't want to convert, unless the experts say the 12% bracket will increase to 15%.

What say ye tax experts?
exodusNH
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Re: 401(k) Limits

Post by exodusNH »

AlaskaTeach wrote: Wed Apr 03, 2024 1:16 am
AlaskaTeach wrote: Tue Apr 02, 2024 11:55 pm ...and for IRA limits, here is info. I found for 2025...

"Taxpayers with traditional IRAs are no longer required to make withdrawals from their account at age 73 and reduces the penalty for not taking required withdrawals. Beginning in 2025, the annual total contribution limits to an IRA will be raised to $10,000 for taxpayers between the ages of 60 and 63.Sep 20, 2023"

for 401k....

"Starting in 2025, catch-up contribution limits for retirement plans such as 401(k)s will increase from $7,500 per year to $10,000. The limit will be indexed for inflation."

Looks to me that I can get my salary down to almost nothing... $10,000 for an IRA and $33,500 for a 401k or 457b.

so, take a 72k teacher salary..first reduce the salary because of medicare and contribution to retirement plan...estimate 72k X .89 = ~64k

Then reduce salary for health insurance pre-tax, HDHP of about $1200, and then HSA pre-tax of about $5250. 64k - 5.250 - 1.2 - 10k - 33.5 = $14050.

Now all I need is for my wife to get about a 50% raise to pay some bills. :D

(I guess I could qualify for the elusive savers tax credit?


Instead of thinking about the savers credit I just realized this would be a golden opportunity to do some Roth conversions on my tax-deferred accounts. Many years ago my wife and I had a large amount of tax credits - about $5000, so I converted her IRA to a Roth at the crazy low tax bracket of 0%. I could almost duplicate that feat??? I could convert to the top of the 12% bracket, which appears to be $94000 for MFJ. Does this make sense?

Looking long-term I also figured out a way to lower my income in retirement. If my pension is scheduled to be about $45000, I could opt for a PLSO (partial lump sum option) that would throw 3 years worth of pension income to my IRA, and my annual pension would be reduced to about 74% of the $45000 figure ~ $33300.

It is possible that depending upon low SS our income could be my pension of 33.3k, her pension from a previous employer of 6.0, her SS of 18k, and later on my SS of 8k. Total would be about 66k, before deductions such as over 65 standard, medicare parts, so is it possible we might actually stay in the 12% bracket for the foreseeable future. If so, maybe I don't want to convert, unless the experts say the 12% bracket will increase to 15%.

What say ye tax experts?
Depending on your future income, you may even consider going up to the 22% bracket. The tax brackets are going to reset higher again in 2026.
AlaskaTeach
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Re: 401(k) Limits

Post by AlaskaTeach »

I don't see us going into the higher tax brackets, ever, but you never know. The important thing will be that people have enough notice about the 2025 brackets to be able to make decisions before 2025 begins.
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Re: 401(k) Limits

Post by mkc »

[Topic is now in Personal Finance (Not Investing) - mod mkc]
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