Question 1

What is the 2024 401(k) contribution limit?

Accepted Answer

The 2024 401(k) contribution limit is $23,000 for employees under age 50. Employees 50 and older can make an additional catch-up contribution of $7,500, bringing the total limit to $30,500. These limits apply to both traditional and Roth 401(k) contributions combined.

Question 2

How does employer matching work?

Accepted Answer

Employer matching is free money added to your 401(k). Common match formulas include 50% match up to 6% (employer adds 3% when you contribute 6%) or 100% match up to 4%. Always contribute enough to get the full employer match - it's an immediate 100% return on that portion.

Question 3

What is the difference between traditional and Roth 401(k)?

Accepted Answer

Traditional 401(k) contributions reduce current taxable income and grow tax-deferred, but withdrawals are taxed as ordinary income. Roth 401(k) contributions are made with after-tax dollars but grow tax-free and withdrawals are tax-free in retirement.

Question 4

When can I withdraw from my 401(k)?

Accepted Answer

You can withdraw from 401(k) without penalty after age 59.5. Early withdrawals before 59.5 incur a 10% penalty plus regular income tax. Exceptions exist for hardship, disability, or using 401(k) for first home purchase (up to $10,000). Required minimum distributions begin at age 73.

Question 5

Should I contribute to 401(k) beyond employer match?

Accepted Answer

Yes, after getting full employer match, continue contributing up to the annual limit if possible. Tax-deferred growth compounds significantly over time. Consider 401(k) after match, then IRA, then remaining 401(k) capacity for optimal tax diversification.

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