The IRS has recently released the 2024 retirement plan contribution limits. For super-savers at Chevron, this is great news. Chevron employees can now contribute $23,000 (or $30,500 for those over 50 years old) of pre-tax or Roth savings to the Chevron Employee Savings Investment Plan and can get up to $84,300 (or $94,800 for those over 50 years old) of retirement savings into tax-efficient vessels in 2024.
How Chevron Employees Can Make Tax-Efficient Retirement Plan Contributions
The maximum amount Chevron employees can put toward after-tax contributions to get the full Chevron match benefit has increased to $18,400. Some Chevron professionals accidentally overfund the after-tax source within the 401(k), which can impact the contributions they receive from Chevron.
If you are contributing after-tax dollars to the Chevron ESIP, consider rolling out the after-tax funds to a Roth IRA at the tail end of the third quarter to take advantage of the mega backdoor Roth strategy. For many Chevron employees that are contributing after-tax, the end of the third quarter is the best time to do what we call an "after-tax rollover" because Chevron will freeze all company and employee after-tax basic contributions to the ESIP for the 90 days that follow the distribution.
How to Max Out Your 401(k) Contributions at Chevron
If you’re under age 50, the total IRS limit for 401(k) contributions in 2024 from employee or employer contributions is $69,000. If Chevron contributes the full $27,600, employees under 50 can contribute $41,400 across the Pre-Tax, Roth, or After-Tax sources.
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If you’re over age 50, the total IRS limit for 401(k) contributions in 2024 from employee or employer contributions is $76,500. If Chevron contributes the full $27,600, employees age 50 and older can contribute $48,900 across the Pre-Tax, Roth, or After-Tax sources.
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2024 401(K) Income Limits and Strategic Savings for Chevron Employees
The annual compensation limit for 2024 has increased from $330,000 to $345,000. If you make more than $345,000 in base and bonus compensation for 2024, remember to ensure that you max out your ESIP contributions before earning $340,000 of income. After you earn $345,000 of income, you can no longer contribute to the Employee Savings Investment Plan.
What is Chevron's 401(k) Match?
Chevron offers up to an 8% contribution to employee 401(k) accounts. Since the annual compensation limit for 2024 is now $345,000, Chevron will now cap out contributions to the ESIP at $27,600. In 2024, once you begin making more than $345,000, Chevron will be making their contributions to the Employee Savings Restoration Plan (ESIP RP) instead of the Employee Savings Investment Plan. If 2024 is the first year you expect to make over $345,000, check that you have an allocation and investment strategy set up for your ESIP RP.
The Backdoor Roth Strategy for Tax-Efficient Savings
In addition, many Chevron employees will be able to take advantage of the backdoor Roth savings strategy. Since the IRA contribution limit for 2024 is $7,000 (and $8,000 for those over 50 years old), super-savers at Chevron can put away $56,700 (or $67,200 for married couples age 55 and above between the 401(k) , backdoor Roths and HSA into tax-preferred retirement accounts. The 2024 limit adjustments will be advantageous for super-savers at Chevron and it is important to be sure that you make the most of these changes.
Chevron Employees Can Maximize Benefits with a Health Savings Account for Tax-Optimized Savings
A Health Savings Account (HSA) is often an under-utilized benefit that provides a unique triple tax advantage:
- Tax-Deductible Contributions: Contributions made to an HSA are tax-deductible, which means they lower your taxable income in the year you make the contribution. This can reduce your overall tax liability. This year, Chevron Employees can contribute up to $8,300 (or up to $10,300 if both spouses are over age 55 and contributing to their respective HSA accounts) for a family.
- Tax-Free Growth: The funds in your HSA can be invested, and any earnings or capital gains from these investments are tax-free as long as they remain in the account. This allows your savings to grow over time without incurring taxes.
- Tax-Free Withdrawals for Qualified Medical Expenses: When you use the HSA funds for qualified medical expenses, the withdrawals are entirely tax-free.
When using an HSA as a retirement fund, Chevron Employees can benefit from both tax deductions and tax-free growth, making HSAs a valuable tool for long-term savings and retirement planning.
At Willis Johnson & Associates, we work with our Chevron clients to ensure they get the full 8% company contribution, take advantage of backdoor Roth IRAs to ensure they are on track for success, and facilitate after-tax roll-outs from the Employee Savings Investment Fund to get the maximum amount of savings. If you have any questions about the 2024 contribution and compensation limits, please contact your advisor, or schedule a free consultation with one of our Chevron specialists.
