The 401(k) contribution limit includes both employee contributions and employer matching contributions, but there are separate limits for each. For 2023, the employee contribution limit is $22,500 and the employer match limit is $66,000. This means that an employee can contribute up to $22,500 to their 401(k) and their employer can contribute an additional $66,000 on their behalf. However, the total amount of money that can be contributed to an employee’s 401(k) is limited to the lesser of these two amounts.
Employer Contribution Limits
The IRS sets annual limits on how much employees and employers can contribute to 401(k) plans. These limits are adjusted periodically for inflation.
2023 Contribution Limits
- Employee elective deferrals: $22,500
- Catch-up contributions (for employees age 50 or older): $7,500
- Employer matching contributions: $66,000
Employer Matching Contributions
Employer matching contributions are funds that an employer contributes to an employee’s 401(k) plan up to a certain percentage of the employee’s salary. For example, an employer may match 50% of the employee’s contribution up to 6% of their salary.
Employer matching contributions are not included in the employee elective deferral limit. This means that an employee can contribute up to the annual employee elective deferral limit ($22,500 in 2023) plus receive up to the employer’s matching contribution limit ($66,000 in 2023).
Table: 2023 401(k) Contribution Limits
| Contribution Type | Limit |
|---|---|
| Employee elective deferrals | $22,500 |
| Catch-up contributions | $7,500 |
| Employer matching contributions | $66,000 |
Participant Contribution Limits
The maximum amount an employee can contribute to their 401(k) plan each year is set by the Internal Revenue Service (IRS). For 2023, the limit is $22,500. Participants who are age 50 or older by the end of the calendar year can contribute an additional $7,500 in catch-up contributions, for a total limit of $30,000.
- The contribution limit applies to both traditional and Roth 401(k) plans.
- Employer matching contributions do not count towards the participant contribution limit.
The IRS also sets limits on the amount of money that employers can contribute to their employees’ 401(k) plans. For 2023, the limit is $66,000. This limit includes both employer matching contributions and profit-sharing contributions.
| Contribution Limit | 2023 |
|---|---|
| Employee Contribution Limit | $22,500 |
| Catch-Up Contribution Limit (age 50+) | $7,500 |
| Employer Matching Contribution Limit | $66,000 |
Annual Contribution Limits
The annual contribution limit for 401(k) plans is set by the IRS and is subject to change each year. For 2023, the limit is $22,500 (plus a catch-up contribution limit of $7,500 for individuals age 50 and older). This limit applies to both employee contributions and employer matching contributions.
It’s important to note that the 401(k) limit includes both employee and employer contributions. This means that if you contribute $10,000 to your 401(k) and your employer matches $5,000, your total contribution for the year will be $15,000. This is still within the annual limit of $22,500.
The following table shows the annual contribution limits for 401(k) plans for the past several years:
| Year | Limit |
|---|---|
| 2023 | $22,500 |
| 2022 | $20,500 |
| 2021 | $19,500 |
| 2020 | $19,000 |
| 2019 | $19,000 |
401k Contribution Limits and Employer Match
A 401(k) is a retirement savings account offered by many employers. Employees contribute a portion of their paycheck to the account pre-tax, reducing their current taxable income. These contributions grow tax-deferred until they are withdrawn in retirement, at which point they are taxed as ordinary income. Employers may also contribute to employee 401(k) accounts, up to certain limits.
Contribution Limits
The annual contribution limit for employee elective deferrals (the amount you contribute from your paycheck) for 2023 is $22,500. This limit increases to $30,000 for individuals age 50 and older.
Employer matching contributions do not count towards the employee elective deferral limit. This means that your employer can contribute additional funds to your 401(k) account, up to certain limits, without affecting the amount you can contribute on your own.
Catch-up Contributions
Individuals age 50 and older are eligible to make catch-up contributions in addition to the regular contribution limits. For 2023, the catch-up contribution limit is $7,500.
Contribution Limits Summary
| Contribution Type | 2023 Limit | Catch-up Contribution Limit (age 50+) |
|---|---|---|
| Employee Elective Deferrals | $22,500 | $30,000 |
| Employer Matching Contributions | No limit | No limit |
| Catch-up Contributions | $7,500 | $7,500 |
It’s important to note that the contribution limits are subject to change each year, so it’s always best to check with your employer or a financial advisor for the most up-to-date information.
And there you have it, folks! The 401k limit can be a bit confusing, but hopefully, this article has shed some light on the subject. Remember, the limit for employee contributions is separate from the limit on employer matching contributions. So, if you’re trying to max out your 401k, be sure to take into account both the employee and employer limits. Thanks for reading, and be sure to check back for more financial insights!