This Popular 401(k) Benefit Is Coming to an End for Some -- Here's What You Should Know
401(k) plans lead the way when it comes to saving and investing for retirement. This is partly because they're employer-sponsored, so many companies auto-enroll their employees; partly because they're hands-off and operate behind the scenes; and partly because they can lower your taxable income.
One overlooked reason a 401(k) can effectively be someone's primary retirement income is its relatively high annual contribution limits. For tax year 2023, the maximum you can contribute to a 401(k) is $22,500. Investors age 50 or older are allowed a catch-up contribution, increasing the limit by $7,500 to $30,000. These limits far exceed IRAs, which have a $6,500 limit and a $1,000 catch-up contribution.
Although catch-up contributions will remain, high earners will see a change in how they work starting in 2024. People earning over $145,000 in the previous year will no longer be able to add their catch-up contributions to their pre-tax 401(k) account. They'll have to go into an after-tax Roth account instead.
Source Fool.com
