2024 Retirement Plan Contribution Limits

Each year, the IRS announces cost of living adjustments associated with certain dollar limitations for retirement plans and tax brackets for the coming year. The below table is a summary of the increases most relevant to our clients. As the end of the year approaches, now is a good time to review your plan contributions and prepare for increased contribution amounts in 2024. 

2023 Retirement Plan Success Stories  

Business Owner Clients 

• Clients own a profitable business with strong cash flows. 
• Clients sought a solution to reduce tax liability and increase savings. 
• Employees of the business requested retirement plan benefits. 

We partnered with our client and their third-party administrator to design a 401(k)/Profit Sharing and Cash Balance Plan Combination for the business. Our clients were able to contribute over $100,000 to the Cash Balance plan for tax year 2022. The result was an immediate tax savings of roughly $45,000 with an additional $50,000 in anticipated tax savings for tax year 2023. Further, they will provide limited contributions to employees under the 401(k) plan, accomplishing all three stated goals. The employees were quite pleased to receive benefits under the plan, resulting in a mutually beneficial plan design for both the owner client and participants. We structured the plan such that the owners have the flexibility to continue contributions depending upon profitability and cash flow needs as the business grows.

 C-Suite Client 

• Client has a complex array of executive benefits including stock options, restricted stock units, incentive stock options, 401(k) and pension plan.
• Client wants to maximize retirement savings while minimizing tax consequences wherever possible.

 We utilized a strategy available within the client’s 401(k) which allows after-tax employee contributions and in-plan Roth conversions to maximize Roth balances and reduce future tax liability. Having created a detailed financial analysis for the client, we advised on the amount and timing of an additional $27,000 in 401(k) contributions (above the annual employee deferral maximum and company match). We then assisted the client in completing an in-plan Roth conversion on the supplemental after-tax contributions, thereby adding $27,000 (more than double previous contributions) to the plan’s Roth balance for plan year 2023. We will continue this process annually. You may be able to increase your Roth allocation if your 401(k) plan allows after-tax contributions and in-plan Roth conversion. We can help you take advantage of this strategy.

 These are just two examples of material benefits afforded to clients who engage in our planning process. As we head into the Holiday season – we want to express our gratitude to each of you. As always, please reach out if you are interested in engaging in financial planning. We do not charge for our planning services and clients often come away with tangible action items to improve their financial lives.