401(k) plans

A 401(k) plan is an employer-sponsored retirement plan that offers several income tax benefits for those looking to save for retirement.

Some of the possible income tax benefits include:

Income tax-deductible employer contributions.
The employer may qualify for an income tax credit of up to $500 per year for the first three years of the plan.
Pretax employee contributions.
After-tax Roth employee contributions have the potential for income tax-free withdrawals after attaining age 59½.*
401(k) plans are usually invested in mutual funds, so each plan participant will have the ability to decide the level of risk he/she is willing to accept to achieve savings goals.
401(k) plans are available for businesses of all sizes, including the self-employed.

Employee salary deferral contribution limits**

Age as of Dec. 31 of the calendar year

Tax year 2024

Under 50-$23,000

Age 50 or older-$30,500

*The Roth 401(k) permits participants to take qualified distributions tax-free if withdrawn after five years of first Roth 401(k) contributions and attainment of age 59½, death or disability. Nonqualified withdrawals may be subject to a 10 percent early withdrawal penalty, and the earnings portion of nonqualified withdrawals may be subject to income taxes. Tax issues involving Roth 401(k)s can be complex. Please consult with your tax or legal advisor before making any decisions.

**These amounts are subject to indexing by the Internal Revenue Service and may increase in the future.