Make the best of a rising 401(k) contribution limit in 2024 — 3 easy ways to plan ahead and supercharge your retirement savings

How much will the 401(k) contribution limit increase?

The contribution limit for employees who participate in 401(k) plans will rise from $22,500 to $23,000. The catch-up contribution limit for persons aged 50 and up will remain at $7,500, therefore a person over 50 could potentially contribute up to $30,500 to their 401(k) in 2024.

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3 ways to prepare for the 401(k) increase

According to the American Retirement Association, 43% of 401(k) plan participants earn less than $50,000 per year. In other words, many if not most households won't realistically be able to set aside $23,000 for their retirement next year. But even if you can't max out your contribution, here are three ways to save more.

1. Revisit your budget.

It takes an extra $41.67 a month to increase your 401(k) contribution by $500 a year. If you receive 26 paychecks a year, that comes out to $19.23 per check. Consider these options for coming up with the cash:

• Cut a monthly streaming subscription or a membership you don't use
• If you're due a tax refund, contribute the refund to your 401(k)
• Use any raise or bonus you receive in 2024 to increase your 401(k) contribution

2. Don't over-save

It may sound counter-intuitive but you can damage your retirement outlook by adding too much money to your 401(k).

If your emergency savings is insufficient, putting all of your surplus income into a retirement account could leave you cash-strapped.

Once you're in that position, you're more likely to use high-interest debt (e.g. credit cards) to cover expenses, or take out a costly 401(k) loan. Both moves can hurt your retirement planning, so prioritize emergency savings first.

Contribute more than the allowed amount to your 401(k) and you could be penalized, with the money treated as taxable income in addition to any earnings. You can also be taxed on the money a second time when you take your distribution.

3. Talk to a professional

Unless you're a financial professional, chances are you're guessing when it comes to your retirement and tax strategies.

The best way to ensure you can take full advantage of the new contribution limits — whether to your 401(k), 403(b) or other account — is to consult with a professional, since changing your retirement contribution can impact several key areas of your finances:

• Taxable income for the tax year you contribute
• Projected retirement income
• Taxes due when you take a distribution

A financial professional can also determine whether any surplus would be better used elsewhere. For example, the health savings account (HSA) contribution limit (for self-only coverage) will increase by $300 for 2024, so putting more money into your HSA could be a smart move.

Who is qualified to help you? According to the Department of Labor, your financial adviser should be a "fiduciary," meaning they are legally obligated to protect your interests and "cannot receive payments that create conflicts of interest." Many "fee-only" advisors fall into this fiduciary category.