The maximum amount you can contribute to your 401(k) plan is determined by the Internal Revenue Service (IRS) each year. In 2023, the maximum contribution limit for individuals is $22,500, with an additional catch-up contribution limit of $7,500 for individuals age 50 and older. However, these limits do not include employer contributions. Employers can contribute up to 100% of your compensation to your 401(k) plan, within certain limits. The total amount of your contributions and your employer’s contributions cannot exceed the annual limit of $66,000 in 2023, or $73,500 for individuals age 50 and older who are eligible for catch-up contributions.
Employer-Sponsored Retirement Savings Plans
Employer-sponsored retirement savings plans, such as 401(k)s, are a great way to save for your future. These plans allow you to contribute pre-tax dollars, which can reduce your current income tax liability. The money in your 401(k) grows tax-deferred, meaning you don’t pay taxes on it until you withdraw it in retirement. This can help you accumulate a significant nest egg over time.
There are two types of 401(k) plans: traditional 401(k)s and Roth 401(k)s. Traditional 401(k)s are funded with pre-tax dollars, while Roth 401(k)s are funded with after-tax dollars. With a traditional 401(k), you pay taxes on the money when you withdraw it in retirement. With a Roth 401(k), you do not pay taxes on the money when you withdraw it in retirement, but you do pay taxes on the money when you contribute it. The decision of which type of 401(k) is right for you depends on your individual circumstances.
The maximum amount you can contribute to a 401(k) plan in 2023 is $22,500. This limit is up from $20,500 in 2022. If you are 50 or older, you can contribute an additional $7,500 in catch-up contributions. This brings the total maximum contribution limit for 2023 to $30,000.
In addition to your own contributions, your employer may also make contributions to your 401(k) plan. These contributions are not included in the maximum contribution limit. However, there are limits on how much your employer can contribute to your plan. In 2023, the limit on employer contributions is $66,000. This limit is up from $61,000 in 2022.
| Year | Maximum Employee Contribution | Maximum Employer Contribution |
|---|---|---|
| 2022 | $20,500 | $61,000 |
| 2023 | $22,500 | $66,000 |
Tax-Deferred Retirement Income
401(k) plans are tax-advantaged retirement savings accounts offered by many employers. Contributions to a 401(k) plan are deducted from your paycheck before taxes, reducing your current taxable income. The money in your 401(k) account grows tax-deferred until you withdraw it in retirement.
Employer contributions to a 401(k) plan are not included in the maximum contribution limit. This means that you can contribute up to the maximum amount allowed by the IRS, even if your employer also contributes to your plan.
Contribution Limits
The maximum contribution limit for 401(k) plans in 2023 is $22,500. This limit applies to both employee and employer contributions. However, the limit is increased to $30,000 for individuals who are age 50 or older by the end of the calendar year.
In addition to the annual contribution limit, there is also a catch-up contribution limit for individuals who are age 50 or older. The catch-up contribution limit is $7,500 in 2023.
Table of Contribution Limits
| Contribution Type | Age < 50 | Age 50+ |
|—|—|—|
| Employee | $22,500 | $30,000 |
| Employer | No limit | No limit |
| Catch-up (age 50+) | $0 | $7,500 |
| Total | $22,500 | $37,500 |
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401(k) Contribution Limits
The maximum amount that employees can contribute to their 401(k) plans is set by the Internal Revenue Service (IRS) each year. For 2023, the limit is $22,500 (plus a catch-up contribution limit of $7,500 for individuals age 50 or older by the end of the calendar year). This limit applies to both traditional and Roth 401(k) plans.
In addition to employee contributions, employers may also make matching contributions to their employees’ 401(k) plans. These contributions are not included in the employee’s contribution limit.
Employer Matching Contributions
Employer matching contributions are a type of retirement savings plan contribution that employers make on behalf of their employees. These contributions are made to the employee’s 401(k) plan, and they are typically based on a percentage of the employee’s salary.
- Employer matching contributions are not included in the employee’s contribution limit.
- Employer matching contributions are subject to the same investment options and withdrawal rules as employee contributions.
- Employer matching contributions can be a valuable way for employees to save for retirement.
Table of 401(k) Contribution Limits
| Year | Employee Contribution Limit | Employer Matching Contribution Limit |
|—|—|—|
| 2023 | $22,500 | 100% of employee’s salary, up to $66,000 (including employee contributions) |
| 2024 | $23,500 | 100% of employee’s salary, up to $68,000 (including employee contributions) |
| 2025 | $24,500 | 100% of employee’s salary, up to $70,000 (including employee contributions) |
Whew, there you have it! We’ve covered everything you need to know about whether those max 401k contributions include your employer’s generous contributions. We know it can be a bit confusing, but hopefully, we’ve cleared things up. If you have any more questions, feel free to drop us a line. In the meantime, thanks for reading! We appreciate your time and hope you’ll come back and visit us again soon.