The IRS has recently released the 2024 retirement plan contribution limits. For super-savers at BP, things are looking up. BP employees can now contribute $23,000 (or $30,500 for those over 50 years old) of pre-tax or Roth savings to the BP Employee Savings Plan (ESP) and can get $84,300 (or $94,800 for married couples age 55 and above) of retirement savings into tax-efficient vessels including the HSA in 2024.
How BP Employees Can Maximize Their Retirement Plan Contributions
What is BP's 401(k) Match?
It’s important to ensure that you are contributing at least 7% of your pay every pay period to receive the full 7% company match. At BP, it is easy to miss the opportunity to receive company contributions, so make sure you do the math every year! The maximum amount BP will put in any employee's 401(k) in 2024 is $24,150.
How to Max Out Your 401(k) Contributions at BP
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 BP contributes the full $24,150, employees under 50 can contribute $44,850 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 BP contributes the full $24,150, employees over age 50 can contribute $52,350 across the Pre-Tax, Roth, or After-Tax sources.
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2024 401(K) Income Limits and Strategic Savings for BP 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 you max out your BP ESP 401(k) contributions prior to earning $345,000 of income. After you earn $345,000 of income, you can no longer contribute to the 401(k), and contributions are deflected to another savings plan, the Excess Compensation Plan (ECP), with more stringent provisions.
BP Employees Can Save More With a Backdoor Roth Strategy for Tax-Optimized Savings
Many BP employees will be able to take advantage of the backdoor Roth savings strategy. With the IRA contribution limits increasing to $7,000 (and $8,000 if over age 50), it means super-savers at BP can put away up to $60,150 (or $70,650 for married couples age 55 and above) between the BP 401(k) , backdoor Roths and the HSA, into tax-preferred retirement accounts. It’s important to keep in mind that these are the maximum numbers and are subject to the income limits outlined in the BP ESP 401(k) Plan
BP 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:
1. 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, BP 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.2. 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.
3. 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, BP Employees can benefit from both tax deductions and tax-free growth, making HSAs a valuable tool for long-term savings and retirement planning.
The 2024 limit adjustments will be advantageous for super-savers at BP and it is important to be sure that you make the most of these changes. At Willis Johnson & Associates, we work with our clients to ensure they get the full 7% company match, take advantage of backdoor Roth IRAs to ensure they are on track for success, and facilitate after-tax roll-outs from the 401(k) 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 BP specialists.
